September 2021. With Michael Benzaquen, Dimitri Kroujiline, and Maxim Gusev
Note: We build a model of capital demand that captures bi-stable behaviors across business cycle timescales. The model has two attracting equilibria (contraction & expansion). This gives rise to quasi-periodic fluctuations, characterized by prolonged entrapment in an equilibrium with by rapid alternations between them. The underlying endogenous mechanism is a coherence resonance phenomenon. While the fluctuations can cause substantial excursions from the equilibrium growth path, such deviations vanish in the long run as supply and demand converge.
September 2021. With Federico Morelli, Michael Benzaquen, Marco Tarzi, Jean-Philippe Bouchaud
Note: In this work, we develop a multi-equilibrium behavioral business cycle model that accounts for demand or supply collapses due to abrupt drops in consumer confidence. Four qualitatively different outcomes can emerge, characterised by the frequency of capital scarcity and/or demand crises. In the absence of policy measures, the duration of such crises can increase by orders of magnitude when parameters are varied, as a result of the ``paradox of thrift''.