The Impact of External Events on the Emergence of Collective States of Economic Sentiment

We investigate the impact of the environment (i.e. the impact of socio-political and socio-economic exogenous events) on the emergence of ordered phases of locally interacting individual economic sentiment variables (consumer confidence, business confidence etc.). The sentiment field is modeled as a (non-critical) Ising field with nearestneighbor interactions on a (two-dimensional) square lattice. The environment is modeled as an external “field of events”, randomly fluctuating over time, stochastically impacting the Ising field of individual variables. The external events can be frequent or rare, have a lasting impact or a non-lasting impact. The field is not homogeneous, as individual actors might fail to perceive external events. We find that if events are sufficiently “strong” and/or perceived by a sufficiently large proportion of agents, collective states of pessimism/optimism can not occur, even for strong inter-agent interactions.