Interactions between the real economy and the stock market
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Beschreibung
We develop a simple behavioral macro model to study interactions between the real economy and the stock market. The real economy is represented by a Keynesian goods market approach while the setup for the stock market includes heterogeneous speculators. Using a mixture of analytical and numerical tools we find, for instance, that speculators may
create endogenous boom-bust dynamics in the stock market which, by spilling over into the real economy, can cause lasting fluctuations in economic activity. However, fluctuations in economic activity may, by shaping the firms’ fundamental values, also have an impact on the dynamics of the stock market.
Autor*in
Frank Westerhoff
Themen in »Interactions between the real economy and the stock market«
Goods market complex dynamics heterogeneous speculators stability analysis, stock market