Visual Modeling of Endogenous Fluctuations in Economic Dynamic Systems

Carl Chiarella and Alexander Khomin - University of Technology

This paper presents the implementation in Visual C++ the simulation and other techniques for the development and investigation of complex nonlinear deterministic and stochastic systems. The presented software allows the user in a friendly and interactive way to provide analysis of the economic model, easily and quickly perform numerical experiments. The proposed set of investigation tools includes simulations with chosen integration routine, steady state modeling and eigenvalue analysis around equilibrium, preparation of bifurcation diagrams and building lyapunov exponents.

The illustrating problem chosen in this paper is a model of monetary dynamics with different beliefs on the part of it's economic agents. It will be shown how the different schemes of agents' expectations formation with and without dynamic learning adjustment influence the behavior of the system which exhibits limit cycle dynamics or chaotic movements.

The application is written using the object oriented approach and provides advanced graphical capabilities under Windows environment. We will use a computer for visual presentation of this paper.

Scheduled for Session 5.6 Computer Languages - I