The nature of monetary arrangements is often discussed without any reference to its detailed construction. We present a graph representation that allows for a clear understanding of modern monetary systems. First, we show that systems based on commodity money are incompatible with credit. We then study the current char…
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48 results for “endogenous money”
Model explains money creation under regulatory constraints.
problem Understanding money creation dynamics under regulatory pressures.
method Agent-based model of secured interbank network.
result Excess liquidity and repurchase agreements emerge due to regulatory constraints.
Negative interest rates stabilize economies, but physical cash limits their effectiveness.
problem Lack of effectiveness of negative interest rates in stabilizing economies.
method Simplified stock-flow consistent model, simulation evidence, discussion of alternative solutions.
result Negative interest rates can stabilize economies, but physical cash limits their effectiveness.
For this special issue, the article aims at discussing a few econophysics problems studied so far rather successfully. The following "applications" in micro-econo-physics are considered : (i) financial crashes; it is emphasized that one can distinguish between endogenous and exogenous causes; (ii) portofolio control, s…
Business-cycles and Cash-on-Market: Pre-money Startup Valuation in the Macroeconomic Environmentq-fin.GN
Business cycles affect startup valuations, both directly and indirectly.
problem How do business cycles impact startup valuations?
method Structural Equation Model approach using a dataset of 1,089 venture capital investments.
result Business cycles impact startup valuations both directly and indirectly.
Money is a technology for promoting economic prosperity. Over history money has become increasingly abstract, it used to be hardware, gold coins and the like, now it is mostly software, data structures located in banks. Here I propose the logical conclusion of the abstraction of money: to use as money the most general …
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process, and a defaultable bond, whose prices are determined via equilibrium. We analyze fi…
An Apology for Moneyq-fin.GN
This review is about the convenience, the benefits, as well as the destructive capacities of money. It deals with various aspects of money creation, with its value, and its appropriation. All sorts of money tend to get corrupted by eventually creating too much of them. In the long run, this renders money worthless and …
We present a macroeconomic agent-based model that combines several mechanisms operating at the same timescale, while remaining mathematically tractable. It comprises enterprises and workers who compete in a job market and a commodity goods market. The model is stock-flow consistent; a bank lends money charging interest…
Model studies money exchange stability in social networks.
problem Stability and wealth equality in money exchange systems.
method Evolved Deffuant model to study money exchange.
result Asymptotic stability and wealth equality conditions identified.
The paper tackles reinforcement learning with exogenous variables and rewards.
problem Exogenous state variables and rewards slow reinforcement learning by introducing uncontrolled variation.
method Formalizes exogenous state variables and rewards, decomposes MDP into exogenous and endogenous components, and introduces algorithms to discover these components.
result Optimal policies for the endogenous MDP are also optimal for the original MDP, but the endogenous MDP is easier to solve due to reduced variance.
Prospects for Money Transfer Modelsphysics.soc-ph
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of individual agents, a pile of money and a specific trading rule. Whatever the trad…
A simple example shows that losing all money is compatible with a very high Sharpe ratio (as computed after losing all money). However, the only way that the Sharpe ratio can be high while losing money is that there is a period in which all or almost all money is lost. This note explores the best achievable Sharpe and …
Existence of incomplete Radner equilibrium with endogenous noise tracker.
problem Existence of incomplete Radner equilibrium in a model with endogenous noise tracker.
method Proved existence through a coupled system of ODEs, reduced to two coupled ODEs.
result Endogenous noise tracker leads to higher aggregate welfare for large stock supply.
Money was invented to address the difficulty in the double coincidence of wants between the supply and demand when people exchanged their goods and services. There are two information states in society: one is the initial state that people have goods and services due to division of labor; the other is the final state t…
The Circulation of Money and Holding Time Distributionphysics.soc-ph
We have studied the statistical mechanics of money circulation in a closed economic system. An explicit statistical formulation of the circulation velocity of money is presented for the first time by introducing the concept of holding time of money. The result indicates that the velocity is governed by behavior pattern…
We consider a simple model of a closed economic system where the total money is conserved and the number of economic agents is fixed. In analogy to statistical systems in equilibrium, money and the average money per economic agent are equivalent to energy and temperature, respectively. We investigate the effect of the …
The statistical distribution of money and the rate of money transferencecond-mat.stat-mech
The distribution of money is analysed in connection with the Boltzmann distribution of energy in the degenerate states of molecules. Plots of the population density of income distribution for various countries are well reproduced by a Gamma function, confirming the validity of the statistical distribution at equilibriu…
In this paper the dependence of wealth distribution and the velocity of money on the required reserve ratio is examined based on a random transfer model of money and computer simulations. A fractional reserve banking system is introduced to the model where money creation can be achieved by bank loans and the monetary a…
Transformers can handle endogeneity in linear regression using IV methods.
problem Endogeneity in in-context linear regression models.
method Transformer architecture with gradient-based bi-level optimization and in-context pretraining.
result Transformers provide more robust predictions and estimates than 2SLS in endogenous scenarios.
In this model study of the commodity market, we present some evidence of competition of commodities for the status of money in the regime of parameters, where emergence of money is possible. The competition reveals itself as a rivalry of a few (typically two) dominant commodities, which take the status of money in turn…
This paper investigates and compares currency substitution between the currencies of Central and Eastern European (CEE) countries and the euro. In addition, we develop a model with microeconomic foundations, which identifies difference between currency substitution and money demand sensitivity to exchange rate variatio…
The paper reveals the hidden costs of digitizing commodity money and proposes a new stable-coin system.
problem Depreciation of banknotes due to high logistics costs after digitization.
method Analyzing the functions of money from a logistics perspective and comparing commodity money to digital currency.
result There is no honest money that is both a store of value and has negligible logistics costs.
This Chapter reviews statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents in payment for goods and services. Starting from the initially equal distrib…
The Dynamics of Moneycond-mat.stat-mech
We present a dynamical many-body theory of money in which the value of money is a time dependent ``strategic variable'' that is chosen by the individual agents. The value of money in equilibrium is not fixed by the equations, and thus represents a continuous symmetry. The dynamics breaks this continuous symmetry by fix…
Log-Ergodic Dynamics in Stochastic Monetary Velocity: Theoretical Insights and Economic Implicationsq-fin.GN
Log-ergodic model improves velocity of money prediction.
problem Improving velocity of money prediction for economic control.
method Log-ergodic processes to simulate monetary velocity.
result Log-ergodic model offers superior predictive power.
Taxonomies of cryptocurrencies and comparisons with fiat money and databases.
problem Comparing cryptocurrencies, fiat money, and databases.
method Taxonomy creation and comparison analysis.
result Cryptocurrencies and databases have unique characteristics not found in fiat money.
We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents in payment for goods and services. We focus on conceptual foundations for this …
New GNN method detects money laundering in diverse customer relationships.
problem Insufficient precision and efficiency of current AML systems.
method Heterogeneous Graph Neural Network (GNN) approach.
result Great potential for enhancing electronic surveillance systems for money laundering.
Role of Selective Interaction in Wealth Distributionphysics.soc-ph
In our simplified description `wealth' is money (). A kinetic theory of gas like model of money is investigated where two agents interact (trade) selectively and exchange some amount of money between them so that sum of their money is unchanged and thus total money of all the agents remains conserved. The probabilit…
Easy conditions found for simplifying complex systems.
problem Linearizing complex two-input systems.
method Endogenous dynamic feedback with a dimension of at most two.
result Necessary and sufficient conditions for linearizability.
An agent-based computational economical toy model for the emergence of money from the initial barter trading, inspired by Menger's postulate that money can spontaneously emerge in a commodity exchange economy, is extensively studied. The model considered, while manageable, is significantly complex, however. It is alrea…
New findings allow infinite mean intensity Hawkes processes to be stable.
problem Stability condition for Hawkes processes with infinite mean intensity.
method Analysis of Quadratic Hawkes processes with infinite mean intensity.
result Quadratic Hawkes processes are always stationary with infinite mean intensity when total endogeneity ratio exceeds unity.
A Self-organising Model of Market with Single Commoditycond-mat.stat-mech
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and commodity. We demonstrate that the model, apart from showing a self-organising behaviour,…
First semi-device independent quantum money scheme introduced, proving unforgeability.
problem Creating secure quantum money without full device independence.
method Inspired by semi-device independent quantum key distribution, relaxes mint's cooperation assumption.
result First unforgeable quantum money scheme with partially relaxed device independence.
The Velocity of Money in a Life-Cycle Modelphysics.soc-ph
The determinants of the velocity of money have been examined based on life-cycle hypothesis. The velocity of money can be expressed by reciprocal of the average value of holding time which is defined as interval between participating exchanges for one unit of money. This expression indicates that the velocity is govern…
Endogeneous Versus Exogeneous Shocks in Systems with Memorycond-mat.stat-mech
Systems with long-range persistence and memory are shown to exhibit different precursory as well as recovery patterns in response to shocks of exogeneous versus endogeneous origins. By endogeneous, we envision either fluctuations resulting from an underlying chaotic dynamics or from a stochastic forcing origin which ma…
This is an invited article for the Discussion and Debate special issue of The European Physical Journal Special Topics on the subject "Can Economics Be a Physical Science?" The first part of the paper traces the personal path of the author from theoretical physics to economics. It briefly summarizes applications of sta…
The paper introduces a new risk statistic considering the time value of money.
problem Traditional risk statistics do not fully account for the time value of money.
method Introducing set-valued risk statistics with the time value of money.
result The new risk statistic provides a more accurate quantification of portfolio risk.
This paper models financial contagion with endogenously determined market liquidity.
problem Financial contagion and its impact on market liquidity during price drops.
method Developed a joint clearing system for interbank payments, asset prices, and market liquidity, with endogenous market capacity.
result Endogenous market liquidity significantly affects system risk during financial contagion.
Money as a Tensorq-fin.GN
Money analyzed as a multidimensional tensor for better economic policy.
problem Economic complexity and policy responsiveness.
method Tensor analysis of money dynamics.
result Enhanced economic policy design and resilience.
We consider the at-the-money strike derivative of implied volatility as the maturity tends to zero. Our main results quantify the behavior of the slope for infinite activity exponential Lévy models including a Brownian component. As auxiliary results, we obtain asymptotic expansions of short maturity at-the-money digit…
Framework detects suspicious money laundering flows in large transaction graphs.
problem Detecting money laundering in large, complex transaction networks.
method Adapted framework for domain-specific constraints, including weighting method for edge significance.
result Framework outperforms state-of-the-art solutions in efficiency and effectiveness for large datasets.
Venice used 'helicopter money' to subsidize during famine and plague, but it caused instability.
problem Subsidizing inhabitants during containment policies while preventing long-term debt increase.
method Net-worth helicopter money strategy, equivalent to monetary expansion generating losses to the issuer.
result The strategy caused much monetary instability and had to be quickly reversed.
This paper reviews statistical and machine learning methods for anti-money laundering.
problem Lack of scientific literature on statistical and machine learning methods for anti-money laundering.
method Client risk profiling and suspicious behavior flagging.
result Client risk profiling involves diagnostics, while suspicious behavior flagging involves non-disclosed features and hand-crafted risk indices.
Endogenous business cycles explain higher comovement across countries.
problem Standard models struggle to explain high comovement in business cycles across countries.
method Developed a demand-driven reduced-form model with strategic complementarities and international trade linkages.
result Combining endogenous business cycles with exogenous shocks matches empirical comovement levels.
Study classifies stock price jumps as exogenous or endogenous using news data.
problem Differentiating between exogenous and endogenous price jumps.
method Synchronized news data with order book data to analyze stock price movements.
result Exogenous jumps are abrupt and follow a decaying power-law, while endogenous jumps are progressively accelerating.
Digital money could reduce germ spread during coronavirus.
problem Spreading of germs via paper money during coronavirus.
method Policy recommendations for mobile wallets, digital currencies, and data protection.
result Adopting digital money can help reduce germ spread.