Fractal Complexity as a Leading Principle of Globally Stable Macroeconomic Dynamics
Department of Management in Socioeconomic Systems, St.Peters
Last modified: April 26, 2006
Traditionally, the absence of fluctuations in the control parameters of macroeconomic systems has been considered as one of the conditions for their stable behavior. In this talk, I will argue that dynamical complexity occurring in modern macroeconomic systems in the form of scale-free fluctuations obeys the opposite tendency: the systems are stable in the long-term run only if their parameters fluctuate according to certain statistical laws. If the fluctuations are suppressed, the systems enter highly unstable dynamical regimes leading to crises. Based on an extended statistical analysis of exchange rate fluctuations, I will demonstrate that this tendency plays an important role in the stability of the international monetary system. The obtained statistics clearly indicate the existence of normal ranges of the volatility and the fractal dimension of the exchange rate dynamics. If these ranges are violated for a prolonged time, national economic systems become vulnerable with respect to small perturbations, which is often followed by large-scale monetary crashes. This effect has been identified in all the monetary crashes occurred during the last 15 years. I have also found that the intensity of the crash is directly linked to the amount of scaling distortions in the exchange rate fluctuations during the pre-crisis period. The revealed phenomena show that the multiscale fractal complexity can be a leading principle of globally stable macroeconomic dynamics under the conditions of extensive information exchange.