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Discrete Dynamics in Nature and Society
Volume 2012, Article ID 504840, 21 pages
Research Article

Interactions between the Real Economy and the Stock Market: A Simple Agent-Based Approach

Department of Economics, University of Bamberg, Feldkirchenstrasse 21, 96045 Bamberg, Germany

Received 12 March 2012; Accepted 15 May 2012

Academic Editor: Aura Reggiani

Copyright © 2012 Frank Westerhoff. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We develop a simple behavioral macromodel to study interactions between the real economy and the stock market. The real economy is represented by a Keynesian-type goods market approach while the setup for the stock market includes heterogeneous speculators. Using a mixture of analytical and numerical tools we find, for instance, that speculators may create endogenous boom-bust dynamics in the stock market which, by spilling over into the real economy, can cause lasting fluctuations in economic activity. However, fluctuations in economic activity may, by shaping the firms' fundamental values, also have an impact on the dynamics of the stock market.