Macroeconomic and financial management in an uncertain world: What can we learn from complexity science?

TL;DR

This paper advocates for applying complexity science to macroeconomics and finance to improve understanding and prediction of economic phenomena, addressing limitations of traditional models.

Contribution

It introduces complexity science as a novel framework for macroeconomic and financial analysis, highlighting its potential benefits for analysts and policymakers.

Findings

Complex systems exhibit emergent behaviors relevant to economics.

Traditional models often fail to capture systemic complexity.

Complexity science can enhance predictive accuracy and policy design.

Abstract

This paper discusses serious drawbacks of existing knowledge in macroeconomics and finance in explaining and predicting economic and financial phenomena. Complexity science is proposed as an alternative approach to be used in order to better understand how economy and financial market work. This paper argues that understanding characteristics of complex system could greatly benefit financial analysts, financial regulators, as well as macroeconomic policy makers.