Stability of money: Phase transitions in an Ising economy

DOI10.1016/S0378-4371(02)01218-9zbMATH Open1001.91073arXivcond-mat/0110201MaRDI QIDQ1847463FDOQ1847463

Authors: Stefan Bornholdt, Friedrich Wagner 

Publication date: 26 November 2002

Published in: Physica A (Search for Journal in Brave)

Abstract: The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from trading between agents. The basic trading scenario can be recast into an Ising type spin model and is studied on the hierarchical network structure of a Cayley tree. We solve this model analytically and observe a phase transition between a one state phase, always allowing for a stable money value, and a two state phase, where an unstable (inflationary) phase occurs. The onset of inflation is discontinuous and follows a first order phase transition. The stable phase provides a parameter region where money value is robust and can be stabilized without fine tuning.

Full work available at URL: https://arxiv.org/abs/cond-mat/0110201

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zbMATH Keywords

phase transitiondynamical variablehierarchical Cayley-tree network structure

Mathematics Subject Classification ID

Macroeconomic theory (monetary models, models of taxation) (91B64) Lattice systems (Ising, dimer, Potts, etc.) and systems on graphs arising in equilibrium statistical mechanics (82B20)

Cites Work

• Equation of state calculations by fast computing machines
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Cited In (7)

• Annealed Ising model on configuration models
• Transfer potentials shape and equilibrate monetary systems
• Crash forecasting in the Korean stock market based on the log-periodic structure and pattern recognition
• Multiscale multifractal DCCA and complexity behaviors of return intervals for Potts price model
• An Ising spin-based model to explore efficient flexibility in distributed power systems
• Money and Goldstone modes
• Quasistable economics and its relationship to the thermodynamics of superfluids. Default as a zero order phase transition

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