Hysteresis of economic networks in an XY model

TL;DR

This paper explores hysteresis phenomena in economic networks using an XY model, revealing that networks resist recovery from crises and require a minimum stimulus size, independent of network specifics.

Contribution

It introduces a novel application of the XY model to analyze hysteresis in economic networks and identifies the minimum stimulus needed for recovery.

Findings

Economic networks exhibit dynamic hysteresis during crises.

A minimum stimulus size is necessary to overcome network resistance.

The minimum stimulus is independent of network characteristics in Watts-Strogatz models.

Abstract

Many-body systems can have multiple equilibria. Though the energy of equilibria might be the same, still systems may resist to switch from an unfavored equilibrium to a favored one. In this paper we investigate occurrence of such phenomenon in economic networks. In times of crisis when governments intend to stimulate economy, a relevant question is on the proper size of stimulus bill. To address the answer, we emphasize the role of hysteresis in economic networks. In times of crises, firms and corporations cut their productions; now since their level of activity is correlated, metastable features in the network become prominent. This means that economic networks resist against the recovery actions. To measure the size of resistance in the network against recovery, we deploy the XY model. Though theoretically the XY model has no hysteresis, when it comes to the kinetic behavior in the deterministic regimes, we observe a dynamic hysteresis. We find that to overcome the hysteresis of the network, a minimum size of stimulation is needed for success. Our simulations show that as long as the networks are Watts-Strogatz, such minimum is independent of the characteristics of the networks.