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Dynamics in a nonlinear Keynesian good market model

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  • Ahmad Naimzada
  • Marina Pireddu
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    Abstract

    In this paper we show how a rich variety of dynamical behaviors can emerge in the standard Keynesian income-expenditure model when a nonlinearity is introduced, both in the cases with and without endogenous government spending. A specific sigmoidal functional form is used for the adjustment mechanism of income with respect to the excess demand, in order to bound the income variation. With the aid of analytical and numerical tools, we investigate the stability conditions, bifurcations, as well as periodic and chaotic dynamics. Globally, we study multistability phenomena, i.e., the coexistence of different kinds of attractors.

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    File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper254.pdf
    File Function: First version, 2013
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    Bibliographic Info

    Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 254.

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    Length: 22
    Date of creation: Sep 2013
    Date of revision: Sep 2013
    Handle: RePEc:mib:wpaper:254

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    Related research

    Keywords: nonlinearities; complex dynamics; Keynesian model; business cycle; fiscal policy;

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    1. Kydland, Finn E & Prescott, Edward C, 1991. " The Econometrics of the General Equilibrium Approach to Business Cycles," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(2), pages 161-78.
    2. Medio,Alfredo & Gallo,Giampaolo, 1995. "Chaotic Dynamics," Cambridge Books, Cambridge University Press, number 9780521484619, April.
    3. Hommes,Cars, 2013. "Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems," Cambridge Books, Cambridge University Press, number 9781107019294, April.
    4. Michael Wegener & Frank Westerhoff, 2012. "Evolutionary competition between prediction rules and the emergence of business cycles within Metzler’s inventory model," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 251-273, April.
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