Design and Analysis of Macro-Economic Models in the Laplace Domain
An Economic-Engineering Approach
G.A.M. van Rijen (TU Delft - Mechanical Engineering)
M.B. Mendel (TU Delft - Team Bart De Schutter)
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Abstract
In this thesis, we demonstrate the efficiency of Laplace domain techniques for the design and analysis of economic systems. To make the techniques applicable to economic modeling, we establish the economic analogs to the various tools and nomenclature in the engineering literature. We show that the Laplace domain provides an alternative description of economic systems, offering insights into behavior not apparent in the time domain. This allows economic discounting and cycles to be efficiently analyzed using pole-zero maps, Bode plots, and similar techniques. In addition, we demonstrate that transforming the linear differential equations of economic engineering into algebraic equations in the Laplace domain simplifies the design of economic systems.
We use the Laplace domain techniques to design and analyze a macroeconomic model. By designing the model in the Laplace domain, we are able to integrate supply chain dynamics and the housing market using two-port network theory.
By analyzing the model using a pole-zero map, we show that the economy's discount rates and business cycles are represented by complex poles and the economy's transmission blocking rates by complex zeros. Additionally, we demonstrate that the Bullwhip effect, a supply chain phenomenon, can be intuitively visualized using a Bode plot. These applications illustrate how Laplace-domain techniques enable the efficient design and analysis of economic systems.