This paper proposes a conceptualization of business cycle fluctuations in which the role of financial conditions and nonlinear dynamics are explicitly incorporated. We emphasize that the sources of instability in an economy cannot be associated exclusively with the real or financial sectors, and we incorporate the idea that financial conditions are both important sources of instability and possible nonlinear propagators of other sources of instability. We test the propagation mechanisms of such conceptualization using a Bayesian Threshold Vector Autoregression model for the US economy.

A significant portion of the work published on firm investment adapts models that operate on an “average firm” assumption, which is different from the investment behavior of a modal firm. This study employs a Bayesian quantile regression model to explore the investment rates in the United States and finds, first, that the firms with higher investment rates have a higher responsiveness to the valuation ratio and lower responsiveness to the profit rate, and, second, that there is a decline in the responsiveness of firm investment to these factors in recent years. The paper also emphasizes the role of autonomous investments in determining firm-level investment rates, based on differing sectoral factors.

Several studies have examined specific characteristics of firms while attempting to explain highly skewed firm size distribution and the presence of extreme values. This study adapted the quantal response statistical equilibrium model of boundedly rational firms and used firms’ probabilistic decision-making to infer the equilibrium relative size distribution. The theoretical model complements conventional and entropy-based concentration measures. The study presents an adaptation for business firms in the United States while investigating firms’ expansion decisions, aspired sizes, and responsiveness to opportunities.

This paper develops a statistical equilibrium model of the firm facing opportunities of profit and growth. A joint equilibrium distribution of profit rate and growth rate is obtained where firms’ probabilistic decisions to compete and allocate their resources and these decisions’ impacts on market outcomes are studied. Using this model, the paper estimates the joint probability density of profit rate and growth rate using firm-level data for the US, between 1962-2022 and documents the time evolution of competitiveness and accumulation behavior.

Formation and dynamics of expectations and their impacts on economic dynamics are central to economic modeling in competing schools of thought. This paper uses information-theoretical models to study the savings market in an ontologically oriented ergodic/nonergodic context and derives the capacity of the communication channels between savers and investors for single-agent and multiple-agent cases.