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Time: 4.00pm - 6.00pm
Venue: Room 1007, John Galsworthy building, Penrhyn Road campus, Penrhyn Road, Kingston upon Thames, Surrey KT1 2EE
Speaker(s): Matheus Grasselli and Antoine Godin
Please join us for this event as part of the Department of Economics Research Seminar Series.
‘Inventory growth cycles with debt-financed investment' by Matheus Grasselli (McMaster University)
We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function of utilization and profitability and can be financed by debt, whereas consumption is independently determined as a function of income and wealth. Prices adjust sluggishly to both changes in labour costs and inventory. Disequilibrium between expected sales and demand is absorbed by unplanned changes in inventory. This results in a five-dimensional dynamical system for wage share, employment rate, private debt ratio, expected sales, and capacity utilization. We analyze two limiting cases: the long-run dynamics provides a version of the Keen model with effective demand and varying inventories, whereas the short-run dynamics gives rise to behaviour that we interpret as Kitchin cycles.
‘Climate financial bubbles: How market sentiments shape the transition to low-carbon capital' by Antoine Godin (Kingston University)
The large-scale transition to low-carbon forms of capital stock is likely to have deep implications on involved companies and the market valuation of their financial assets, with repercussion on financial investors holding the assets and potential disruptive systemic effects. We analyze here the link between finance and the low-carbon transition by means of a multi-sector macroeconomic model with two forms of physical capital - high-carbon and low-carbon - and financial investors allocating their wealth across equities issued by productive sectors. In our baseline scenario the low-carbon transition produces some relevant macroeconomic and financial fluctuations, especially when the high-carbon capital sector defaults. We then study how financial market sentiments might affect the shape of the transition by allowing investors to develop varying degrees of `apathetic' expectations around the development of the low-carbon sector and limited perceptions regarding its actual size. We show that higher levels of `climate apathy' extend the length of the transition period, possibly to the point of preventing it to happen, and produce larger amounts of both physical and financial stranded assets. Our results support the call for increased climate-related financial disclosures and the implementation of policies to help investors reduce uncertainty.
Matheus Grasselli is a Professor at McMaster Univesity and was the Deputy Director of the Fields Institute for Research in Mathematical Sciences from 2012 to 2016. He has an undergraduate degree in physics from the University of Sao Paulo in 1997 and a Ph.D. in mathematics from King's College London in 2002. He was appointed Sharcnet Chair in Financial Mathematics at McMaster University in 2003, where he currently is Co-Director of PhiMac, the Financial Mathematics Laboratory. His current research focusses on mathematical macroeconomics, particularly financial instability. He has published research papers on information geometry, statistical physics, and numerous aspects of quantitative finance, including interest rate theory, optimal portfolio, real options, and executive compensation, as well as an undergraduate textbook on numerical methods. His consulting activities include projects with CIBC, Petrobras, EDF, and Bovespa. He is a regular speaker in both academic and industrial conferences around the world, and he was the lead organizer of the Thematic Program on Quantitative Finance: Foundations and Applications at the Fields Institute in 2010. Starting in 2011, he began serving as the first managing editor for the newly created book series Springer Briefs on Quantitative Finance.
Antoine Godin is an Associate Professor of Economics at Kingston University. He holds a M.Sc. in applied mathematics engineering and a Ph.D. in economics. He has developed two modelling software: a R package to design, calibrate and simulate Stock-Flow Consistent models, and a java platform to design and simulate Agent-Based Stock-Flow Consistent models. Antoine has published numerous articles both on methodological and theoretical aspects, combining various strands of literature, and applied to diverse topics such as environmental, labour or innovation economics in journal such as the Journal of Evolutionary Economics, the Cambridge journal of Economics or the Journal of Economic Dynamics and Control. Antoine is frequently invited to teach advanced macro-modelling lectures on these methodologies.
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Contact: Antoine Godin
Directions to Room 1007, John Galsworthy building, Penrhyn Road campus, Penrhyn Road, Kingston upon Thames, Surrey KT1 2EE: