void:search* blog

In general macroeconomic modeling , we assume continuous models, such as either single-rule models, which assume instantaneous reaction of endogenous variable to the change in exogenous variable, or a distributed lag model, where that change is continuous but distributed over time. However, what might seem like a equally plausible case is the phase shift theory - where we assume that the changes in behavior are discrete between the phases and continuous within each phase.

For example in the case of change of consumption as result of change in income, we can notice that individual economic subject might undergo several phases , starting from modest increase in spending, via irrational overspending to 0 consumption. Within each individual phase, behavior can be determined by single continuous macroeconomic law, whereas between phases it can take both different functional form and different set of parameters. We aim at identifying phase shift in collective behavior, as a support for the case that individual irrationality can contribute to the failure of behavior modeling via simple-form macroeconomic laws.