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Long waves and short cycles in a model of endogenous financial fragility

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  • Ryoo, Soon

Abstract

This paper presents a stock-flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms' and households' financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves.

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Bibliographic Info

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

Volume (Year): 74 (2010)
Issue (Month): 3 (June)
Pages: 163-186

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Handle: RePEc:eee:jeborg:v:74:y:2010:i:3:p:163-186

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Keywords: Cycles Long waves Financial fragility Stock-flow consistency;

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Citations

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Cited by:
  1. Peter Skott, 2011. "Increasing inequality and financial instability," UMASS Amherst Economics Working Papers 2011-20, University of Massachusetts Amherst, Department of Economics.
  2. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2013. "Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development," INET Research Notes 34, Institute for New Economic Thinking (INET).
  3. Passarella, Marco, 2012. "A simplified stock-flow consistent dynamic model of the systemic financial fragility in the ‘New Capitalism’," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 570-582.
  4. Michalis Nikiforos, 2013. "Uncertainty and Contradiction: An Essay on the Business Cycle," Economics Working Paper Archive wp_770, Levy Economics Institute.
  5. Soon Ryoo & Peter Skott, 2013. "Public debt and full employment in a stock-flow consistent model of a corporate economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 35(4), pages 511-528, July.
  6. Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
  7. Carl Chiarella & Corrado Di Guilmi, 2014. "Financial instability and debt deflation dynamics in a bottom-up approach," Economics Bulletin, AccessEcon, vol. 34(1), pages 125-132.
  8. Peter Skott, 2011. "Heterodox macro after the crisis," UMASS Amherst Economics Working Papers 2011-23, University of Massachusetts Amherst, Department of Economics.
  9. Yun Kim & Soon Ryoo, 2013. "Income Distribution, Consumer Debt, and Keeping Up with the Joneses: a Kaldor-Minsky-Veblen Model," Working Papers 1302, Trinity College, Department of Economics.
  10. Peter Skott, 2011. "Business cycles," UMASS Amherst Economics Working Papers 2011-21, University of Massachusetts Amherst, Department of Economics.
  11. Marco, Passarella, 2011. "Systemic financial fragility and the monetary circuit: a stock-flow consistent approach," MPRA Paper 28498, University Library of Munich, Germany.
  12. Stephen Kinsella & Antoine Godin & G. Tiou-Tagba Aliti, 2012. "Method to Simultaneously Determine Stock, Flow, and Parameter Values in Large Stock Flow Consistent Models," INET Research Notes 20, Institute for New Economic Thinking (INET).
  13. Passarella, Marco, 2011. "The two-price model revisited. A Minskian-Kaleckian reading of the process of 'financialization'," MPRA Paper 32033, University Library of Munich, Germany.

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