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Local Bifurcations and Global Dynamics in a Solow-type Endogenous Business Cycles Model

Author

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  • Orlando Gomes

    (Escola Superior de Comunicacao Social [Instituto Politecnico de Lisboa]
    Unidade de Investigacao em Desenvolvimento Empresarial [UNIDE/ISCTE])

Abstract

Neoclassical growth models are essentially characterized by the formation of a steady state where the main economic aggregates (capital, output, consumption and investment) do not grow, unless some external event takes place (e.g., technological progress or population growth). Hence, the long term result corresponds to a fixed point and any kind of endogenous fluctuations is ruled out. This paper introduces an inefficiency mechanism through which non perfect firms¡¯ expectations about future demand conduct to underinvestment, which originates periodic and a-periodic long run cycles; this mechanism is applied over the simplest neoclassical growth model, the Solow equation regarding capital accumulation. Results, containing a large variety of dynamic features, are discussed through the analysis of local bifurcations and through numerical examples that give insights about global dynamics.

Suggested Citation

  • Orlando Gomes, 2006. "Local Bifurcations and Global Dynamics in a Solow-type Endogenous Business Cycles Model," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 91-127, May.
    • Handle: RePEc:cuf:journl:y:2006:v:7:i:1:p:91-127
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    References listed on IDEAS

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    Cited by:

    1. Gomes, Orlando, 2007. "Externalities in R&D: a route to endogenous fluctuations," MPRA Paper 2850, University Library of Munich, Germany.
    2. Gomes, Orlando, 2008. "Too much of a good thing: Endogenous business cycles generated by bounded technological progress," Economic Modelling, Elsevier, vol. 25(5), pages 933-945, September.
    3. Orlando Gomes, 2008. "Decentralized Allocation of Human Capital and Nonlinear Growth," Computational Economics, Springer;Society for Computational Economics, vol. 31(1), pages 45-75, February.
    4. Orlando Gomes, 2008. "Can interaction contribute to the explanation of business cycles?," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 35(3), pages 159-173, February.
    5. Orlando Gomes, 2007. "The Dynamics of Growth and Migrations with Congestion Externalities," Economics Bulletin, AccessEcon, vol. 15(1), pages 1-8.

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    More about this item

    Keywords

    Endogenous business cycles; Solow growth model; Nonlinear dynamics; Bifurcations; Chaos;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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