eprintid: 16641 rev_number: 18 eprint_status: archive userid: 1482 importid: 105 dir: disk0/00/01/66/41 datestamp: 2015-03-16 14:53:30 lastmod: 2021-04-02 15:49:33 status_changed: 2017-06-20 14:50:26 type: article metadata_visibility: show creators_name: Bonart, Julius creators_name: Bouchaud, Jean-Philippe creators_name: Landier, Augustin creators_name: Thesmar, David creators_idrefppn: 178412457 creators_idrefppn: 11260207X creators_idrefppn: 079129447 creators_affiliation: Capital Fund Management creators_affiliation: Capital Fund Management creators_affiliation: Capital Fund Management; TSE creators_affiliation: Capital Fund Management / HEC and CEPR, Dept Economics and Finance title: Instabilities in large economies: aggregate volatility without idiosyncratic shocks ispublished: pub subjects: subjects_ECO abstract: We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is still formally a stationary solution of the dynamics, we show that this equilibrium becomes linearly unstable in a whole region of parameter space. When agents attempt to reach the optimal production target too quickly, coordination breaks down and the dynamics becomes chaotic. In the unstable, 'turbulent' phase, the aggregate volatility of the total output remains substantial even when the amplitude of idiosyncratic shocks goes to zero or when the size of the economy becomes large. In other words, crises become endogenous. This suggests an interesting resolution of the 'small shocks, large business cycles' puzzle. date: 2014-10 date_type: published publisher: Institute of Physics Publishing id_number: 10.1088/1742-5468/2014/10/P10040 official_url: http://tse-fr.eu/pub/28817 faculty: tse divisions: tse keywords: critical phenomena of socio-economic systems keywords: nonlinear dynamics keywords: dynamics of supply and production networks language: en has_fulltext: FALSE view_date_year: 2014 full_text_status: none publication: Journal of Statistical Mechanics: Theory and Experiment volume: 2014 refereed: TRUE issn: 1742-5468 oai_identifier: oai:tse-fr.eu:28817 harvester_local_overwrite: oai_set harvester_local_overwrite: issn harvester_local_overwrite: faculty harvester_local_overwrite: site harvester_local_overwrite: publication harvester_local_overwrite: publisher harvester_local_overwrite: id_number harvester_local_overwrite: creators_affiliation harvester_local_overwrite: creators_idrefppn oai_lastmod: 2017-05-31T08:58:33Z oai_set: tse oai_set: ut1c site: ut1 citation: Bonart, Julius , Bouchaud, Jean-Philippe, Landier, Augustin and Thesmar, David (2014) Instabilities in large economies: aggregate volatility without idiosyncratic shocks. Journal of Statistical Mechanics: Theory and Experiment, 2014.