With what appears to be the increasing sensitivity of economic/financial systems to various events, whether they be natural disaster, changing financial products or government policy, the need to understand how volatility has changed in modern economic systems and how to recognize when volatility will occur is a topic that is extremely important. This topic has been categorized under various topics such as: business cycles, chaos, dynamic systems, fractals, Brownian motion and super cycles just to name a few. The author believes that all of these areas need to be considered at once when analyzing dynamic phenomena which may have varying degrees of the aforementioned. This chapter will implement a Hicksian Accelerator to develop a framework for stylized facts of general dynamic macroeconomic behavior. The chapter will then implement the model and begin the process of estimating the degree of and sensitivity to volatility in a macro economy.
The Transition from Brownian Motion to Boom-and-Bust Dynamics in Financial and Economic Systems