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Business cycles, bifurcations and chaos in a neo-classical model with investment dynamics

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  • Hallegatte, Stéphane
  • Ghil, Michael
  • Dumas, Patrice
  • Hourcade, Jean-Charles

Abstract

This paper presents a non-equilibrium dynamic model (NEDyM) that introduces investment dynamics and non-equilibrium effects into a Solow growth model. NEDyM can reproduce several typical economic regimes and, for certain ranges of parameter values, exhibits endogenous business cycles with realistic characteristics. The cycles arise from the investment-profit instability and are constrained by the increase in labor costs and the inertia of production capacity. For other parameter ranges, the model exhibits chaotic behavior. These results show that complex variability in the economic system may be due to deterministic, intrinsic factors, even if the long-term equilibrium is neo-classical in nature.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 67 (2008)
Issue (Month): 1 (July)
Pages: 57-77

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Handle: RePEc:eee:jeborg:v:67:y:2008:i:1:p:57-77

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Citations

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Cited by:
  1. repec:hal:ciredw:hal-00866431 is not listed on IDEAS
  2. Kemp-Benedict, Eric, 2012. "The national bioenergy investment model: Technical documentation," MPRA Paper 37835, University Library of Munich, Germany.
  3. Gomes, Orlando, 2007. "A two-dimensional non-equilibrium dynamic model," MPRA Paper 4817, University Library of Munich, Germany.
  4. Guivarch, Céline & Hallegatte, Stéphane & Crassous, Renaud, 2009. "The resilience of the Indian economy to rising oil prices as a validation test for a global energy-environment-economy CGE model," Energy Policy, Elsevier, vol. 37(11), pages 4259-4266, November.
  5. Gomes, Orlando, 2012. "Information stickiness in general equilibrium and endogenous cycles," Economics Discussion Papers 2012-46, Kiel Institute for the World Economy.
  6. Orlando Gomes, 2010. "Endogenous Growth, Price Stability And Market Disequilibria," Metroeconomica, Wiley Blackwell, vol. 61(1), pages 3-34, 02.
  7. Stéphane Hallegatte & Michael Ghil, 2007. "Endogenous Business Cycles and the Economic Response to Exogenous Shocks," Working Papers 2007.20, Fondazione Eni Enrico Mattei.
  8. Elena Olmedo, 2014. "Forecasting Spanish Unemployment Using Near Neighbour and Neural Net Techniques," Computational Economics, Society for Computational Economics, vol. 43(2), pages 183-197, February.
  9. repec:hal:wpaper:hal-00866431 is not listed on IDEAS
  10. Hallegatte, Stéphane & Dumas, Patrice, 2009. "Can natural disasters have positive consequences? Investigating the role of embodied technical change," Ecological Economics, Elsevier, vol. 68(3), pages 777-786, January.

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