Advanced Search
MyIDEAS: Login

Misperception-driven chaos: Theory and policy implications

Contents:

Author Info

  • Yokoo, Masanori
  • Ishida, Junichiro

Abstract

In a large economy, it is extremely difficult, if not impossible, to immediately grasp the state of our surrounding environment with precision since we normally have access only to a subset of relevant information. In this paper, we introduce this information imperfection into an ordinary model of endogenous business cycles and examine how it would affect the dynamic nature of the model. We, in particular, present a mechanism by which observation errors result in chaotic fluctuations in a model that would behave regularly otherwise, thereby indicating the importance of potential misperception about the current state in a qualitative sense. Also, our model is tractable enough to explicitly derive a policy index of chaotic fluctuations under some conditions. This feature of the model allows us to draw some policy implications regarding the observability of macroeconomic state variables.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V85-4P4FV1S-3/1/93ae6fd93765aaa4f3bd543b17b785d4
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 32 (2008)
Issue (Month): 6 (June)
Pages: 1732-1753

as in new window
Handle: RePEc:eee:dyncon:v:32:y:2008:i:6:p:1732-1753

Contact details of provider:
Web page: http://www.elsevier.com/locate/jedc

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Matsuyama, K., 1996. "Growing through cycles," DELTA Working Papers 96-18, DELTA (Ecole normale supérieure).
  2. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  3. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical dynamics and economics," Journal of Economic Behavior & Organization, Elsevier, vol. 16(1-2), pages 37-83, July.
  4. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
  5. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  6. Bruce E. Hansen & Mehmet Caner, 1997. "Threshold Autoregressions with a Unit Root," Boston College Working Papers in Economics 381, Boston College Department of Economics.
  7. Ishida, Junichiro & Yokoo, Masanori, 2004. "Threshold nonlinearities and asymmetric endogenous business cycles," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 175-189, June.
  8. Hess, Gregory D. & Iwata, Shigeru, 1997. "Asymmetric persistence in GDP? A deeper look at depth," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 535-554, December.
  9. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
  10. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
  11. Matsumoto, Akio, 2005. "Density function of piecewise linear transformation," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 631-653, April.
  12. Bohm, Volker & Kaas, Leo, 2000. "Differential savings, factor shares, and endogenous growth cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 965-980, June.
  13. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
  14. Nishimura, Kazuo & Yano, Makoto, 1995. "Nonlinear Dynamics and Chaos in Optimal Growth: An Example," Econometrica, Econometric Society, vol. 63(4), pages 981-1001, July.
  15. McQueen, Grant & Thorley, Steven, 1993. "Asymmetric business cycle turning points," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 341-362, June.
  16. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical Dynamics and Economics," Working Paper Series 293, Research Institute of Industrial Economics.
  17. Wilfredo L. Maldonado & Aloisio P. Araujo, 2000. "Ergodic chaos, learning and sunspot equilibrium," Economic Theory, Springer, vol. 15(1), pages 163-184.
  18. Matsumoto, Akio, 2001. "Can inventory chaos be welfare improving," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 31-43, May.
  19. Anjan Mukherji, 1999. "A simple example of complex dynamics," Economic Theory, Springer, vol. 14(3), pages 741-749.
  20. Huang, Weihong, 2005. "On the statistical dynamics of economics," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 543-565, April.
  21. W.A. Razzak, 2001. "Business Cycle Asymmetries: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 230-243, January.
  22. Gale, Douglas, 1996. "Delay and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 169-98, April.
  23. Onozaki, Tamotsu & Sieg, Gernot & Yokoo, Masanori, 2003. "Stability, chaos and multiple attractors: a single agent makes a difference," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1917-1938, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gomes, Orlando, 2012. "Information stickiness in general equilibrium and endogenous cycles," Economics Discussion Papers 2012-46, Kiel Institute for the World Economy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:32:y:2008:i:6:p:1732-1753. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.