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Navier-Stokes-Inspired Global Liquidity-Flow and Systemic-Stress Modelling: A Nondimensional Macro-Financial Stress-Testing Framework

Author

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  • Gondauri, Davit

Abstract

This study develops a global Navier-Stokes-inspired macro-financial stress-testing framework for measuring systemic stress as a nondimensional flow-pressure-friction-shock-cycle-closure process rather than as a collection of isolated macro-financial indicators. The framework does not claim that financial liquidity is a physical fluid, does not solve the mathematical Navier-Stokes problem and does not establish a universal crisis-prediction law. Instead, it translates the structural logic of velocity, acceleration, pressure gradients, diffusion/friction, external forcing and closure into an empirically auditable economic analogue. The empirical architecture is organized around a 100-country annual panel for 2010-2024, yielding 1,500 country-year observations, supplemented by a World aggregate anchor, macro-regional aggregation, rolling validation windows, robustness layers, external-target validation, Monte Carlo uncertainty analysis and policy counterfactuals. Systemic stress is constructed from normalized stress-direction components and interpreted jointly with liquidity resilience. The central balance decomposes stress into liquidity velocity weakness, liquidity acceleration, macro-financial pressure gradients, liquidity friction/diffusion, stochastic shocks, Fourier GDP-cycle forcing and a restricted hidden-adjustment term epsilon(t). The closure equation is modelled through observable or proxy-observable state variables, including lagged closure, shadow-economy pressure, external transfers, geopolitical shock, fiscal buffers, foreign aid/support and economic inertia, preventing epsilon(t) from operating as an unrestricted residual plug. The results show stable weighting robustness, coherent closure signs, strong rolling one-year-ahead validation performance over 2017-2024, favorable benchmark comparison against ARIMA, VAR, GARCH and composite-index baselines, statistically coherent fixed-effects associations, plausible external-target validation, residual stability, robustness under perturbation and interpretable Monte Carlo and policy-counterfactual effects. The contribution is methodological and empirical: a transparent, reproducible and scientifically bounded stress-testing architecture for global liquidity-flow diagnostics and systemic-risk interpretation.

Suggested Citation

  • Gondauri, Davit, 2026. "Navier-Stokes-Inspired Global Liquidity-Flow and Systemic-Stress Modelling: A Nondimensional Macro-Financial Stress-Testing Framework," EconStor Preprints 341616, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:341616
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    References listed on IDEAS

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    1. Viral V. Acharya & Lasse H. Pedersen & Thomas Philippon & Matthew Richardson, 2017. "Measuring Systemic Risk," The Review of Financial Studies, Society for Financial Studies, vol. 30(1), pages 2-47.
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    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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