Learning in a double-phase cobweb model

In this paper, we study a class of markets, among which we can mention agricultural and energy markets, characterized by seasonality, i.e., in which demand and/or supply conditions cyclically alternate with a precise and known periodicity. We propose a new theoretical framework based on a cobweb model with adaptive expectations, accordingly modified to be consistent with market’s seasonality. The model, consisting in a second-order non-autonomous difference equation, is investigated with the aim of understanding how the periodical nature of the market together with the agents’ expectation formation mechanism affects the resulting dynamics. We analytically prove the emergence of dynamical scenarios that are missing in the classic cobweb model for non-seasonal markets, such as quasi-periodic dynamics and an ambiguous role on stability of the expectation weight. Finally, we discuss their economic rationale with the help of numerical simulations. In such a peculiar economic framework, agents’ learning plays a key role to explain the dynamical properties of economic observables.

Testing for structural break in aggregated consumption function of Russian households

The paper considers a simple aggregated consumption function for Russian economy in which households consume a constant fraction of a permanent income. The value of this fraction is estimated by households within the framework of the adaptive expectations process based on the dynamics of GDP at constant consumption prices. Testing for a structural break at an unknown date in the parameter of the propensity to consume is performed. The results of econometric estimation, taking into account the presence of an endogeneity in the regression equation, demonstrate that after 2014 there was a structural break, as a result of which the parameter of the propensity to consume of permanent GDP decreased by 6.5—9.2%.

Local Stability of Cournot Equilibrium as the Number of Firms Increases

In this paper, a Cournot oligopoly with isoelastic demand function and constant marginal cost is considered. The local stability conditions of the Cournot equilibrium are determined for four models with different decision mechanisms. In the first model, firms adjust their outputs using the best reply response with naive expectations. The second model is a generalization of the first one, where firms have adaptive expectations. Meanwhile, the third and fourth models adopt the bounded rationality and local monopolistic approximation, respectively. The results show that, in the case of identical firms, the Cournot equilibrium is always stable when the firms adopt the local monopolistic approximation mechanism.

Macroeconomics and political misuse: Interpreting economic policy

The paper focuses the impact of political abuse of economic policy on macroeconomic results, as well as the macroeconomic models that investigate this impact. The paper also presents the development of modern macroeconomics, along with main changes in the way of creating economic policy. Two key political motives - opportunistic (to stay in power as long as possible) and partisan - to achieve ideological goals in the field of economics, are considered in the context of traditional models that assume naive voters and adaptive expectations, but also in the context of rational models that include rational voters and expectations. The paper also gives certain recommendations for overcoming the politically motivated behavior of economic policymakers.

Impacts of interannual climate and biophysical variability on global agriculture markets

Most studies assessing climate impacts on agriculture have focused on average changes in market-mediated responses (e.g., changes in land use, production, and consumption). However, the response of global agricultural markets to interannual variability in climate and biophysical shocks is poorly understood and not well represented in global economic models. Here we show a strong transmission of interannual variations in climate-induced biophysical yield shocks to agriculture markets, which is further magnified by endogenous market fluctuations generated due to producers’ imperfect expectations of market and weather conditions. We demonstrate that the volatility of crop prices and consumption could be significantly underestimated (i.e., on average by 55% and 41%, respectively) by assuming perfect foresight, a standard assumption in the economic equilibrium modeling, compared with the relatively more realistic adaptive expectations. We also find heterogeneity in interannual variability across crops and regions, which is considerably mediated by international trade.