The macroeconomy as a network of money-flow transfer functions

Abstract

An introduction on A. W. Phillips "hydraulic" macroeconomic models is given. His (and others economists') notion that a macroeconomy may reasonably be considered to have dynamics corresponding to a first order time lag transfer function, is justified in this paper by aggregation of individual micro agents. In connection with this economic application, we derive and discuss a theorem and some rules for general networks of time lagged blocks. Finally, Monte Carlo simulations of networks of micro agents are undertaken, supporting the validity of the first order time lag aggregate model.