A New Approach to Stability Analysis for Economic Systems

Many economic systems exhibit periods of instability, particularly when subject to external shocks. This instability can have large effects on the welfare of consumers, investors and producers. For example, the recent international financial crisis has underscored the potential for instability in credit and asset markets, and the impact of this instability on households and firms. Based on a simple and original idea, this project will develop an important new class of methods for analysing stability in economic systems. These methods will illuminate the underlying determinants of stability and instability in a variety of applications, enhance our understanding of economic systems, and aid in the design of related economic policy.