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To the problem of turbulence in quantitative easing transmission channels and transactions network channels at quantitative easing policy implementation by central banks

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  • Dimitri O. Ledenyov
  • Viktor O. Ledenyov

Abstract

In agreement with the recent research findings in the econophysics, we propose that the nonlinear dynamic chaos can be generated by the turbulent capital flows in both the quantitative easing transmission channels and the transaction networks channels, when there are the laminar turbulent capital flows transitions in the financial system. We demonstrate that the capital flows in both the quantitative easing transmission channels and the transaction networks channels in the financial system can be accurately characterized by the Reynolds numbers. We explain that the transition to the nonlinear dynamic chaos regime can be realized through the cascade of the Landau, Hopf bifurcations in the turbulent capital flows in both the quantitative easing transmission channels and the transaction networks channels in the financial system. We completed the computer modeling, using both the Nonlinear Dynamic Stochastic General Equilibrium Theory (NDSGET) and the Hydrodynamics Theory (HT), to accurately characterize the US economy in the conditions of the QE policy implementation by the US Federal Reserve. We found that the ability of the US financial system to adjust to the different levels of liquidity depends on the nonlinearities appearance in the QE transmission channels, and is limited by the laminar turbulent capital flows transitions in the QE transmission channels and the transaction networks channels in the US financial system. The proposed computer model allows us to make the accurate forecasts of the US economy performance in the cases, when there are the different levels of liquidity in the US financial system.

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Paper provided by arXiv.org in its series Papers with number 1305.5656.

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Date of creation: May 2013
Date of revision: May 2013
Handle: RePEc:arx:papers:1305.5656

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  1. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Rafael, 2007. "On the Fit of New Keynesian Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 123-143, April.
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  11. Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
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  14. Vladimir Klyuev & Phil De Imus & Krishna Srinivasan, 2009. "Unconventional Choices for Unconventional Times Credit and Quantitative Easing in Advanced Economies," IMF Staff Position Notes 2009/27, International Monetary Fund.
  15. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2012. "On the new central bank strategy toward monetary and financial instabilities management in finances: Econophysical analysis of nonlinear dynamical financial systems," Papers 1211.1897, arXiv.org.
  16. 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.
  17. 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.
  18. 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.
  19. Ben S. Bernanke & Vincent R. Reinhart, 2004. "Conducting Monetary Policy at Very Low Short-Term Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 85-90, May.
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Cited by:
  1. 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.
  2. 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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