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On the new central bank strategy toward monetary and financial instabilities management in finances: Econophysical analysis of nonlinear dynamical financial systems

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  • Dimitri O. Ledenyov
  • Viktor O. Ledenyov

Abstract

We describe the innovations in finances, introduced over the recent decades, and analyze most of the business and regulatory challenges, faced by the financial industry, because of the present disruptive changes in the global capital markets. We use the integrative thinking approach to formulate the new central bank strategy and propose that the new strategy has to be focused on the constant management of the monetary and financial instabilities, using the knowledge base in the field of econophysics. We propose the new theoretical model of economics, which is called the Nonlinear Dynamic Stochastic General Equilibrium (NDSGE), which takes to the account the nonlinearities, appearing during the interaction between the business cycles. We show that the central banks, which will apply the knowledge gained from the econophysical analysis to understand the complex processes in the national financial systems in the time of high volatility in global capital markets, will be able to govern the national financial systems successfully.

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File URL: http://arxiv.org/pdf/1211.1897
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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 1211.1897.

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Date of creation: Nov 2012
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Publication status: Published in The Financial Times, The Bodley Head and The Random House first annual essay competition in London in the U.K. in 2012
Handle: RePEc:arx:papers:1211.1897

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References

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  1. Viktor O. Ledenyov & Dimitri O. Ledenyov, 2012. "Designing the new architecture of international financial system in era of great changes by globalization," Papers 1206.2778, arXiv.org.
  2. Viktor O. Ledenyov & Dimitri O. Ledenyov, 2012. "Shaping the international financial system in century of globalization," Papers 1206.2022, arXiv.org.
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Citations

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Cited by:
  1. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2013. "On the theory of firm in nonlinear dynamic financial and economic systems," Papers 1302.6721, arXiv.org, revised Mar 2013.
  2. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2013. "To the problem of turbulence in quantitative easing transmission channels and transactions network channels at quantitative easing policy implementation by central banks," Papers 1305.5656, arXiv.org, revised May 2013.
  3. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2013. "On the optimal allocation of assets in investment portfolio with application of modern portfolio and nonlinear dynamic chaos theories in investment, commercial and central banks," Papers 1301.4881, arXiv.org, revised Feb 2013.
  4. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2013. "To the problem of evaluation of market risk of global equity index portfolio in global capital markets," MPRA Paper 47708, University Library of Munich, Germany, revised 20 Jun 2013.
  5. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2012. "On the Risk Management with Application of Econophysics Analysis in Central Banks and Financial Institutions," Papers 1211.4108, arXiv.org.
  6. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2013. "On the accurate characterization of business cycles in nonlinear dynamic financial and economic systems," Papers 1304.4807, arXiv.org.
  7. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2013. "On the Stratonovich – Kalman - Bucy filtering algorithm application for accurate characterization of financial time series with use of state-space model by central banks," MPRA Paper 50235, University Library of Munich, Germany.
  8. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2013. "Some thoughts on accurate characterization of stock market indexes trends in conditions of nonlinear capital flows during electronic trading at stock exchanges in global capital markets," MPRA Paper 49921, University Library of Munich, Germany.

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