%0 Journal Article
%T Stability of money: Phase transitions in an Ising economy
%A Stefan Bornholdt
%A Friedrich Wagner
%J Quantitative Finance
%D 2001
%I arXiv
%R 10.1016/S0378-4371(02)01218-9
%X The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from trading between agents. The basic trading scenario can be recast into an Ising type spin model and is studied on the hierarchical network structure of a Cayley tree. We solve this model analytically and observe a phase transition between a one state phase, always allowing for a stable money value, and a two state phase, where an unstable (inflationary) phase occurs. The onset of inflation is discontinuous and follows a first order phase transition. The stable phase provides a parameter region where money value is robust and can be stabilized without fine tuning.
%U http://arxiv.org/abs/cond-mat/0110201v1