nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2022‒03‒07
24 papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. The Ethics of Nudge: Towards a governance structure for the ethical use of nudge theory by Governments By Raj, Vijay
  2. From exit to control: The structural power of finance under asset manager capitalism By Braun, Benjamin
  3. Redistributing Income Through Hierarchy By Fix, Blair
  4. Islamic finance, growth, and stability By Hasan, Zubair
  5. Do new investment strategies take existing strategies' returns -- An investigation into agent-based models By Takanobu Mizuta
  6. Socialist Economic Development in the 21st Century By Cuong, Nghiem Phu Kien; Khiem, Bui Quang
  7. Revisiting the Urban Question in the Age of the New Urban Crisis: The (Re)Production of the Regime of Flexible Accumulation By Sternberg, Jeff
  8. Opinion Dynamics in Financial Markets via Random Networks By Mateus F. B. Granha; Andr\'e L. M. Vilela; Chao Wang; Kenric P. Nelson; H. Eugene Stanley
  9. Instability of financial markets by optimizing investment strategies investigated by an agent-based model By Takanobu Mizuta; Isao Yagi; Kosei Takashima
  10. Agroecology as an ontology to guide agricultural and food systems? By Domptail, Stephanie; Hirsch, Jennifer; Ume, Chukwuma
  11. Financialisation as a (it’s-not-meant-to-make-sense) gigantic global joke By Palma, J. G.
  12. Technological interdependencies and employment changes in European industries By Lorenzo Cresti; Giovanni Dosi; Giorgio Fagiolo
  13. Forthcoming in "Journal of the History of Economic Though" in 2024. Title: "Does Friendship Stem from Altruism? Adam Smith and the Distinction between Love-based and Interest-based Preferences" By Khalil, Elias
  14. Kenneth Boulding: A Friends' Economist By Robert Scott
  15. When are Universities Followers or Leaders in Society? A Framework for a Contemporary Assessment By Aubrey Douglass, John
  16. Rock el Casbah, Egyptian Arab Spring and women's empowerment By Olivier Bargain; Delphine Boutin; Hugues Champeaux
  17. Workfare as the forced free labor of social benefit recipients By Maud Simonet
  18. Scholarly Activity among Economists at Liberal Arts Colleges: A Life Cycle Analysis By Jenny Bourne; Nathan Grawe; Nathan D. Grawe; Michael Hemesath; Maya Jensen
  19. The future(s) of unpaid work: How susceptible do experts from different backgrounds think the domestic sphere is to automation By Lehdonvirta, Vili; Shi, Lulu; Hertog, Ekaterina; Ohta, Yuji; Ohta, Yuji
  20. Pastoral women, tenure, and governance By Flintan, Fiona
  21. The Network Structure of Occupations: Fragmentation, Differentiation, and Contagion By Lin, Ken-Hou; Hung, Koit
  22. Publishing in the social sciences and its representation in research evaluation and funding systems By Sivertsen, Gunnar
  23. The Paradox of Redistribution in Time. Social Spending in 53 Countries, 1967-2018. By Xabier Garcia-Fuente
  24. Detecting and Measuring Financial Cycles in Heterogeneous Agents Models: An Empirical Analysis By Filippo Gusella

  1. By: Raj, Vijay
    Abstract: This paper explores the use of nudge theory within governments and performs a pragmatic evaluation of its adoption by policymakers from an ethical point of view. While most critics argue against the use of nudge theory by governments from an academic or philosophical standpoint, this paper examines the use of nudge theory as one of the many tools available for policymakers and adopts a pragmatic approach. The paper concludes by calling for a governance structure that addresses the ethical concerns and ensures the ethical application of nudge theory through the development of an ethical nudge.
    Date: 2021–11–22
  2. By: Braun, Benjamin
    Abstract: Political economists have theorized the structural power of finance as a function of the scarcity of financial capital, which empowers its owners and intermediaries to (threaten) exit. This theory has trouble explaining the non-death of the rentier at a time when financial capital is abundant and lacks a credible exit option. This paper presents a theory updated for a world characterized by financial capital abundance, and by a shift in the predominant function of finance from banking to asset management. Today, asset managers pool financial capital on a scale that often puts them in a position of (near) control, while also maintaining a high degree of portfolio diversification. This defining feature of asset manager capitalism, although observable across asset classes, is most pronounced in the corporate economy. Whereas the control-based dominance of finance capital during the early 20th century was characterized by credit-debt relationships between banks and corporations, today asset managers’ equity holdings dominate; and whereas the shareholder capitalism of the late 20th century was characterized by impatient investors wielding the threat of exit, the power of asset managers in corporate governance is based on their large and illiquid, yet fully diversified shareholdings. Theorizing the structural power of finance as based on control and diversification helps explain both the rentier’s longevity and asset managers’ contribution to that outcome.
    Date: 2021–10–12
  3. By: Fix, Blair (York University)
    Abstract: Although the determinants of income are complex, the results are surprisingly uniform. To a first approximation, top incomes follow a power-law distribution, and the redistribution of income corresponds to a change in the power-law exponent. Given the messiness of the struggle for resources, why is the outcome so simple? This paper explores the idea that the (re)distribution of top incomes is uniform because it is shaped by a ubiquitous feature of social life, namely hierarchy. Using a model first developed by Herbert Simon and Harold Lydall, I show that hierarchy can explain the power-law distribution of top incomes, including how income gets redistributed as the rich get richer.
    Date: 2021–10–23
  4. By: Hasan, Zubair
    Abstract: Economists regard the financial and the real sectors of an economy as complementary; the two sides of the same coin. Islamic finance conceives of these sectors differently, albeit not independent of each other. Islamic approach is distinct in that it shuns interest, speculation and indeterminacy. At the same time, it is not independent because Islam allows a time value for money, and maintains of asset liquidity plus system stability as its guiding business principles. The discussion n the subject is scanty. This paper seeks to fill the gap. A diversion briefly discusses debt versus equity as sources for financing growth bringing in technology.
    Keywords: Islam; finance; Stability, Profit sharing; Debt; Equity; Technology Islam; finance; Stability, Profit sharing; Debt; Equity; Technology Islam; Finance; Growth, Stability; Technology
    JEL: E1 E6
    Date: 2021–08
  5. By: Takanobu Mizuta
    Abstract: Commodity trading advisors (CTAs), who mainly trade commodity futures, showed good returns in the 2000s. However, since the 2010's, they have not performed very well. One possible reason of this phenomenon is the emergence of short-term reversal traders (STRTs) who prey on CTAs for profit. In this study, I built an artificial market model by adding a CTA agent (CTAA) and STRT agent (STRTA) to a prior model and investigated whether emerging STRTAs led to a decrease in CTAA revenue to determine whether STRTs prey on CTAs for profit. To the contrary, my results showed that a CTAA and STRTA are more likely to trade and earn more when both exist. Therefore, it is possible that they have a mutually beneficial relationship.
    Date: 2022–02
  6. By: Cuong, Nghiem Phu Kien; Khiem, Bui Quang
    Abstract: Over a hundred years after the first socialist revolution broke the global monopoly of capitalism, a new class of socialist-oriented socioeconomic development is coming to the fore. Capitalism is still dominant worldwide, although its hegemony is no longer undisputed, and humankind is now faced with a key existential challenge. This book proposes an alternative path to overcoming the worldwide crisis of globalized capitalism. It offers a novel, balanced, and historically rooted interpretation of the successes and failures of socialist economic construction throughout the last century.
    Date: 2022–01–10
  7. By: Sternberg, Jeff (University of Texas at Austin)
    Abstract: Scholars have recently remarked upon the emergence of what Richard Florida has termed The New Urban Crisis, a global phenomenon whereby cities are being lumped into winners and losers, with inequality rising in the winner cities where real estate prices are pushing out those who most need access to the opportunities hoarded within. In this article, I argue that the new urban crisis is not a crisis of the city per se but is itself a symptom of greater crises occurring at the level of global capitalism. By revisiting Castells’ The Urban Question, I read the new urban crisis as a product of how the urban social structure fits into the reproduction of capitalism on a global scale, arguing that, under the regime of flexible accumulation, the urban social structure is asked to reproduce two distinct circuits of capital accumulation set loose by the transition to post-industrialism: accumulation via production and accumulation via finance. These distinct circuits of accumulation utilize the elements of urban social structures differentially, often at cross purposes. This produces continued crises in the reproduction of capitalism, as well as continually shifting relations between elements of the urban social structure, producing a plurality of urban forms.
    Date: 2021–12–16
  8. By: Mateus F. B. Granha; Andr\'e L. M. Vilela; Chao Wang; Kenric P. Nelson; H. Eugene Stanley
    Abstract: We investigate the financial market dynamics by introducing a heterogeneous agent-based opinion formation model. In this work, we organize the individuals in a financial market by their trading strategy, namely noise traders and fundamentalists. The opinion of a local majority compels the market exchanging behavior of noise traders, whereas the global behavior of the market influences the fundamentalist agents' decisions. We introduce a noise parameter $q$ to represent a level of anxiety and perceived uncertainty regarding the market behavior, enabling the possibility for an adrift financial action. We place the individuals as nodes in an Erd\"os-R\'enyi random graph, where the links represent their social interaction. At a given time, they assume one of two possible opinion states $\pm 1$ regarding buying or selling an asset. The model exhibits such fundamental qualitative and quantitative real-world market features as the distribution of logarithmic returns with fat-tails, clustered volatility, and long-term correlation of returns. We use Student's t distributions to fit the histograms of logarithmic returns, showing the gradual shift from a leptokurtic to a mesokurtic regime, depending on the fraction of fundamentalist agents. We also compare our results with the distribution of logarithmic returns of several real-world financial indices.
    Date: 2022–01
  9. By: Takanobu Mizuta; Isao Yagi; Kosei Takashima
    Abstract: Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of investors can impact and change market prices, making optimization impossible. In this study, we built an artificial market model by adding technical analysis strategy agents searching one optimized parameter to a whole simulation run to the prior model and investigated whether investors' inability to accurately estimate market impacts in their optimizations leads to optimization instability. In our results, the parameter of investment strategy never converged to a specific value but continued to change. This means that even if all other traders are fixed, only one investor will use backtesting to optimize his/her strategy, which leads to the time evolution of market prices becoming unstable. Optimization instability is one level higher than "non-equilibrium of market prices." Therefore, the time evolution of market prices produced by investment strategies having such unstable parameters is highly unlikely to be predicted and have stable laws written by equations. This nature makes us suspect that financial markets include the principle of natural uniformity and indicates the difficulty of building an equation model explaining the time evolution of prices.
    Date: 2022–02
  10. By: Domptail, Stephanie; Hirsch, Jennifer; Ume, Chukwuma
    Abstract: Current agriculture and food systems worldwide are facing major sustainability challenges, which jeopardize the ability of future generations to live a good life: soil fertility and biodiversity loss, climate change, malnutrition and inequalities. These problems are, in part, related to how agricultural and food systems have developed. The IPES 2016 report on food systems calls for a shift from low input traditional and industrial agricultural systems to diversified agroecological systems. We claim that this shift requires more than a change in practice. Rather it implies a redefinition of the conception of agricultural and food systems and their evaluation. The talk discusses those facets of agricultural and food systems which can gain visibility though a reading of agroecology from the ecological and feminist economics perspective. For instance, the analysis of the worldview of agroecological farmers in Germany reveals the role of reproductive and egalitarian principles and values in designing the farming systems and of community-supported agricultural schemes. Politically, these principles can be interpreted a struggle to maintain sovereignty and act upon own values. We finally reflect on what it implies for food security that agroecological systems nurture their reproductive capacity. The rise of agroecology raises questions about the values that shape agricultural and food systems and engenders a “new” target: the reproduction capacity of our societies.
    Keywords: Food Consumption / Nutrition / Food Safety, Food Security and Poverty, Environmental Economics and Policy
    Date: 2021–11–18
  11. By: Palma, J. G.
    Abstract: This paper analyses events in financial markets since the 2008 financial crisis in both the developed and the developing worlds, giving especial attention to the processes of ‘financialisation’; that is, to the combined effect of the growing size and dominance of the financial sector relative to the non-financial sector, and the diversification towards financial activities in non-financial corporations. The main conclusion is that we are paying the price (and a huge one) for two related phenomena; one belongs to the realm of ideology and knowledge, the other to ‘power play’.
    Keywords: manias, panics, financialisation, QE, excess liquidity, ‘disconnect’ between the financial and the real worlds, emerging markets, Latin America, Asia, Keynes, Kindleberger, Minsky, Buchanan
    JEL: E22 D70 D81 E51 F02 F21 F32 F40 F63 G15 G20 G30 L51 N20 O16
    Date: 2022–02–11
  12. By: Lorenzo Cresti; Giovanni Dosi; Giorgio Fagiolo
    Abstract: This work addresses the role of inter-sectoral innovation flows, which we frame as technological interdependencies, in determining sectoral employment dynamics. This purpose is achieved through the construction of an indicator capturing the amount of R&D expenditures embodied in the backward linkages of industries. We aim to find out whether having a more integrated production in terms of requiring more technological inputs is related to a lower demand for workers within the sector. We refer to the literature on innovation-employment nexus, inter-sectoral knowledge spillovers and Global Value Chains, building upon structuralist and evolutionary theoretical considerations. We track the flows of embodied technological change between industries taking advantage of the notion of vertically integrated sectors. The relevance of this vertical technological dimension for determining employment dynamics is then tested on a panel data of European industries over the 2008-2014 period. Results show a statistically significant and negative employment impact of the degree of vertical integration in terms of acquisitions of R&D embodied inputs. Combining the role of demand, the double nature of innovation - as product and as process -, together with intersectoral linkages, this work shows that the dependence of a sector from innovation performed by other ones - a proxy for input embodied process innovations - exert a negative effect upon employment.
    Keywords: Input-Output; Sectoral Interdependencies; Employment; Embodied Technological Change; Innovation Diffusion.
    Date: 2022–02–16
  13. By: Khalil, Elias
    Abstract: Friendship-and-love expresses musings about wellbeing—while “wellbeing” is the economist’s substantive satisfaction. Insofar as altruism is about wellbeing, it must differ from friendship-and-love. However, what is the basis of the difference between substantive satisfaction and friendship-and-love? The answer can be found in Smith’s Theory of Moral Sentiments, chapter 2: how “mutual sympathy” differs from “sympathy.” Smith scholars generally miss the uniqueness of “mutual sympathy” and, indeed, fold it under Smith’s “sympathy” (and “empathy”)—with one exception. Robert Sugden highlights the uniqueness of mutual sympathy. However, he goes to the other end, folding Smith’s “sympathy-and-empathy” under “mutual sympathy.” This paper aims to avoid the folding in either direction. While mutual sympathy originates love-based sociality (friendship-and-love), sympathy-and-empathy originates interest-based sociality (wellbeing that includes altruism). This paper concludes that friendship is neither reducible to altruism nor vice versa. Further, this paper distinguishes this problem from the question regarding the socialization of the individual.
    Date: 2021–12–17
  14. By: Robert Scott (Monmouth University)
    Abstract: This paper examines Kenneth Boulding's (1910-1993) religious beliefs and argues he was one of the most prolific religious economists in the 20 th century. He was an enigmatic economist whose career spanned over six decades. He helped to establish the field of general systems and furthered peace studies and conflict and defense. His early work earned him the John Bates Clark medal in 1949. But behind Boulding's theoretical economics was a deep religious ideology. Strongly affected by World War I while growing up in Liverpool, England, Boulding became a lifelong pacifist. Raised Methodist, Boulding discovered Quakerism in high school. While Boulding published widely in the field of economics, he also published almost 100 articles in Quaker journals. Boulding's body of work in economics and Quakerism led to interesting crosspollination. His work on peace and conflict and defense were a direct result of his pacifism. Boulding's work shows deep concern for human betterment and prosperity that is seeped in his religious principles.
    Keywords: human betterment,Kenneth Boulding,pacifism,Quakers,Religious Society of Friends
    Date: 2022–01–24
  15. By: Aubrey Douglass, John
    Abstract: In assessing the current and future role of universities in the nation-states in which they are chartered and funded, it is useful to ask, When are universities societal leaders as societal and constructive change agents, and when are they followers, reinforcing the existing political order? As discussed in the book, Neo-Nationalism and Universities: Populists, Autocrats and the Future of Higher Education, the national political history and contemporary context is the dominant factor for shaping the leadership or follower role of universities – what I call a political determinist interpretation. We often think of contemporary universities, and their students and faculty, as catalysts for societal progress -- the Free Speech and Civil Rights movements, Vietnam War protests, the anti-Apartheid movement, Tiananmen Square, and more recently the pro-democracy demonstrations in Hong Kong. Universities can be, and have been, the locus for not only educating enlightened future leaders, but also for opposing oppression and dictatorships. But universities have also proved over their history to be tools for serving the privileged, and reinforcing the social class divisions of a society; they also have been factories for errant theories that reinforce the worst of nationalist tendencies. Universities are both unique environments for educating and mentoring free thinkers, entrepreneurs, and citizens with, for example, a devotion to social change, or for creating conformists -- or all of the above. How might we assess whether universities are followers or leaders in their societies? This essay considers this question, offering a framework for evaluating the follower or leader role, and with particular attention to the emergence or, in some cases, re-emergence of neo-nationalist leaders and autocratic governments.
    Keywords: Education, Social and Behavioral Sciences, Universities, Civil Society, Academic Freedom, Neo-Nationalism
    Date: 2022–02–16
  16. By: Olivier Bargain; Delphine Boutin; Hugues Champeaux (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: In Egypt, the Arab Spring has been a massive popular revolution, very unpredictable and characterised by an active participation of women. This revolution has moved forward until the households, where women exposed to the revolution have raised their bargaining power.
    Abstract: En Egypte, le Printemps Arabe fut celui d'une révolution populaire, imprévisible, caractérisée par une participation active des femmes. Cette révolution s'est poursuivie jusque dans les ménages, où les femmes exposées aux évènements révolutionnaires ont accru leur pouvoir de décision.
    Keywords: Genre,Révolution,Printemps arabe,Egypte
    Date: 2020–06
  17. By: Maud Simonet (IDHES - Institutions et Dynamiques Historiques de l'Économie et de la Société - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique - UPN - Université Paris Nanterre - UP8 - Université Paris 8 Vincennes-Saint-Denis - UP1 - Université Paris 1 Panthéon-Sorbonne)
    Abstract: After presenting the historical stages of the welfare reform and its moral, gendered, and racist foundations, this paper shows how the institutionalization of workfare, this unpaid and coerced form of labor, blurs the frontiers of wage labor and participates in a new regulation of the labor market that both devalues work and makes it invisible.
    Abstract: Cet article présente les étapes et les fondements moraux, genrés et racistes de la réforme de l'assistance inspirée par le workfare. Il montre ensuite les conséquences de l'institutionnalisation du travail gratuit et contraint, qui brouille les frontières du salariat et participe d'une nouvelle régulation du marché du travail, où ce dernier est invisibilisé et dévalorisé.
    Date: 2021
  18. By: Jenny Bourne (Carleton College); Nathan Grawe; Nathan D. Grawe; Michael Hemesath; Maya Jensen
    Date: 2022–01
  19. By: Lehdonvirta, Vili; Shi, Lulu; Hertog, Ekaterina; Ohta, Yuji; Ohta, Yuji
    Abstract: The “future of work” has emerged as a prominent area of future making. Regardless of how accurate predictions about automation turn out to be, they are influencing present-day policies. In this article we expand the debate to unpaid domestic work, which so far has been excluded. We report on a forecasting exercise in which 64 AI experts from the UK and Japan estimated how automatable are 17 housework and care work tasks. Unlike previous studies, we draw on sociological and feminist literature to understand how experts’ diverse backgrounds may shape their visions. On average the experts predict that 39 percent of the time spent on a domestic task is automatable within ten years. Japanese male experts are notably pessimistic about the potentials of domestic automation, a result we interpret through gender disparities in the Japanese household. Without dismissing the practice of forecasting entirely, we demonstrate how predictions are socially contingent.
    Date: 2022–01–25
  20. By: Flintan, Fiona
    Abstract: Customary pastoral tenure and governance systems are relatively broad sets of institutions characterized by principles of collectivity, flexibility, adaptability, and multiple uses by multiple users (Davies et al. 2016; Flintan et al. 2021). These tenure systems are becoming ever more complex as livelihoods and land use diversify and as pastoralists attempt to access land and resources through mechanisms other than their customary institutions, including through privatization and formalized land certification (Flintan et al. 2021; Nori 2021). The resulting tenure systems are described by Robinson (2019) as “complex mosaics.†Alternatively, Flintan (2021) (following Niamir-Fuller 2005) refers to them as “nested†systems where regulating laws and institutions work on the basis of “territory†or “domain,†under which there is a hierarchy of nested, overlapping bundles of rights for diverse sets of users and often for the same resource. Despite these complexities, collective tenure continues to be core, ensuring pastoralist systems function well and their resilience to crises such as drought is strengthened.
    Keywords: ETHIOPIA, EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, TANZANIA, INDIA, SOUTH ASIA, ASIA, pastoral lands, gender, women, governance, pastoralism, tenure, men, land use, tenure security
    Date: 2021
  21. By: Lin, Ken-Hou; Hung, Koit
    Abstract: Occupational structure is commonly viewed as either hierarchical or organized around stable classes. Yet, recent studies have proposed to describe occupational structure as a network, where the mobility of workers demarcates boundaries. Moving beyond boundary detection, this article develops occupational network as a dynamic system in which between-occupation exchange is shaped by occupational similarities, and occupational attributes are in turn responsive to mobility patterns. We illustrate this perspective with the exchange networks of detailed occupations. Our analysis shows that the U.S. occupational structure has become more fragmented. The division was in part associated with the emerging importance of age composition, as well as those of quantitative, creative, and social tasks. The fragmentation reduced wage contagion and therefore contributed to a greater between-occupation wage dispersion. These results indicate that occupational attributes and mobility are co-constitutive, and that a network perspective provides a unifying framework for the study of stratification and mobility.
    Date: 2021–10–19
  22. By: Sivertsen, Gunnar
    Abstract: The paper describes the full range of publishing and its purposes in the social sciences – from scholarly publishing via professional communication to societal interaction in public media – and how it is represented in five different contexts for research evaluation and funding. The five contexts are: applications for external project funding, applications for positions or promotions, indicator-based institutional funding systems, summative organizational evaluation systems, and formative organizational evaluation systems. The chapter provides a critical discussion of how publications from the social sciences may be filtered out or placed in predetermined hierarchies in these evaluation and funding contexts, and also of how the evaluation and funding procedures can be improved to appropriately represent social science research and publishing.
    Date: 2022–01–03
  23. By: Xabier Garcia-Fuente
    Abstract: Korpi and Palme (1998) famously suggested the existence of a Paradox of Redistribution: although programs targeted to the poor may be more redistributive per unit of expenditure, universal programs reduce distributive conflicts, leading to bigger, more egalitarian welfare states. However, recent works question the existence of this trade-o?. My paper adds a dynamic, long-term perspective to this literature: it analyzes the relationship between the progressivity and the redistributive impact of social transfers in 53 rich and middle-income countries, using microdata from 479 household surveys harmonized by LIS. My results show that the relationship between the redistribution obtained by social transfers and their progressivity is non-monotonic and is contingent on initial policy positions: welfare states that focused on the poor have grown bigger and more egalitarian by moving up the income ladder to include richer constituencies, while welfare states that focus on the rich are unable to reach down the income ladder and remain stuck at very low levels of redistribution. This reflects how social policies shape distributive conflicts: expanding upwards in the income distribution narrows the gap between contributors and beneficiaries, easing distributive conflict and allowing welfare state expansion. In contrast, expanding downwards draws a clear gap between contributors and beneficiaries, making welfare state politics zero-sum. This fits with evidence on the long-term evolution of universal welfare states – as they grew from means-tested cores to earnings-related universalism – and countries with elitist social policies, exemplified by Latin American countries that remain captured by the middle classes and the rich. In short, my results reinforce the idea that increases in redistribution are driven by status-preserving considerations – not by attempts at soaking the rich.
    Date: 2021–10
  24. By: Filippo Gusella
    Abstract: This paper proposes a macroeconometric analysis to depict and measure possible financial cycles that emerge due to the dynamic interaction between heterogeneous market participants. We consider 2-type heterogeneous speculative agents: Trend followers tend to follow the price trend while contrarians go against the wind. As agents' beliefs are unobserved variables, we construct a state-space model where heuristics are considered as unobserved state components and from which the conditions for endogenous cycles can be mathematically derived and empirically tested. Further, we specifically measure the length of endogenous financial cycles. The model is estimated using the equity price index for the 1960–2020 period for the UK, France, Germany, and the USA. We find empirical evidence of endogenous financial cycles for all four countries, with the highest frequencies in the USA and the UK.
    Keywords: Heterogeneous Agent Models, Heterogeneous Expectations, Endogenous Cycles, State Space Model, Period of Cycles
    JEL: C13 C32 G10 G12 E32
    Date: 2022

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