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Nonlinearity and Chaos in Economic Models: Implications for Policy Decisions

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  • Bullard, James
  • Butler, Alison

Abstract

This survey paper discusses the policy implications that can be expected from the recent research on nonlinearity and chaos in economic models. Expected policy implications are interpreted as a driving force behind the recent proliferation of research in this area. In general, it appears that no new justification for policy intervention is developed in models of endogenous fluctuations, although this conclusion depends in part on the definition of equilibrium. When justified, however, policy tends to be very effective in these models. Copyright 1993 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 103 (1993)
Issue (Month): 419 (July)
Pages: 849-67

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Handle: RePEc:ecj:econjl:v:103:y:1993:i:419:p:849-67

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References

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  1. Michele Boldrin & Michael Woodford, 1988. "Equilibruim Models Displaying Endogenous Fluctuations and Chaos: A Survey," UCLA Economics Working Papers 530, UCLA Department of Economics.
  2. Michael Woodford, 1990. "Equilibrium Models of Endogenous Fluctuations: an Introduction," NBER Working Papers 3360, National Bureau of Economic Research, Inc.
  3. Ramsey, J.B. & Sayers, C.L. & Rothman, P., 1988. "The Statistical Properties Of Dimension Calculations Using Small Data Sets: Some Economic Applications," Papers 15, Houston - Department of Economics.
  4. Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-56, July-Aug..
  5. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
  6. Kelsey, David, 1988. "The Economics of Chaos or the Chaos of Economics," Oxford Economic Papers, Oxford University Press, vol. 40(1), pages 1-31, March.
  7. Becker, R.C. & Foias, C., 1992. "The Local Bifurcation of Ramsey Equilibrium," Papers 92-002, Indiana - Center for Econometric Model Research.
  8. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  9. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  10. Scheinkman, Jose A, 1990. "Nonlinearities in Economic Dynamics," Economic Journal, Royal Economic Society, vol. 100(400), pages 33-48, Supplemen.
  11. Baumol, William J & Benhabib, Jess, 1989. "Chaos: Significance, Mechanism, and Economic Applications," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 77-105, Winter.
  12. William Barnett, 2005. "Monetary Aggregation," Macroeconomics 0503017, EconWPA.
  13. LeBaron, B., 1991. "Empirical Evidence for Nonlinearities and Chaos in Economic Time Series: A Summary of Recent Results," Working papers 9117, Wisconsin Madison - Social Systems.
  14. Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
  15. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  16. Alison Butler, 1990. "A methodological approach to chaos: are economists missing the point?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 36-48.
  17. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
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Citations

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Cited by:
  1. Jang-Ting Guo & Kevin Lansing, 1999. "Fiscal policy, increasing returns, and endogenous fluctuations," Working Papers in Applied Economic Theory 99-08, Federal Reserve Bank of San Francisco.
  2. Vivaldo M. Mendes & Diana A. Mendes, 2006. "Active Interest Rate Rules and the Role of Stabilization Policy R&D Tax Credits," Working Papers Series 1 ercwp0208, ISCTE-IUL, Business Research Unit (BRU-IUL).
  3. William A. Barnett & Alfredo Medio & Apostolos Serletis, 1997. "Nonlinear and Complex Dynamics in Economics," Econometrics 9709001, EconWPA.
  4. Orlando Gomes, 2007. "Imperfect Demand Expectations and Endogenous Business Cycles," Money Macro and Finance (MMF) Research Group Conference 2006 127, Money Macro and Finance Research Group.
  5. Franz Alonso Hamann S., 1996. "Puede Explicarse El Precio Externo Del Café Con Un Modelo Econometrico No Lineal?," BORRADORES DE ECONOMIA 003408, BANCO DE LA REPÚBLICA.
  6. Atanas Christev, 2006. "Learning Hyperinflations," Computing in Economics and Finance 2006 475, Society for Computational Economics.
  7. 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.
  8. Sorger, Gerhard, 1998. "Imperfect foresight and chaos: an example of a self-fulfilling mistake," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 363-383, January.
  9. Andrei Kapaev, 2013. "Remark on repo and options," Papers 1311.5211, arXiv.org.
  10. Orlando Gomes, 2006. "Endogenous Business Cycles in the Ramsey Growth Model," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 9(2), pages 13-36, November.

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