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Cycles and Crises in a Model of Debt-financed Investment-led Growth

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  • Datta, Soumya

Abstract

The paper demonstrates possibilities of both convergence to the steady state and emergence of stable growth cycles around it in a simple macrodynamic model of debt-financed investment-led growth. The growth cycles are robust and are generated endogenously, either due to the existence of a supercritical Andronov-Hopf bifurcation, or due to the global stability condition through an application of the Poincaré-Bendixson theorem. The emergence of multiple limit cycles is also observed under certain conditions. The possibility of a deterioration of financial variables during a boom, with the resulting financial crisis providing an endogenous ceiling to a business cycle is examined in this context.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50200.

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Date of creation: 12 Dec 2012
Date of revision: 12 Dec 2012
Handle: RePEc:pra:mprapa:50200

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Related research

Keywords: Growth cycles; Financial crisis; Fisher; Minsky; Andronov-Hopf bifurcation; Limit cycles.;

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References

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  1. Stiglitz, Joseph E & Weiss, Andrew, 1992. "Asymmetric Information in Credit Markets and Its Implications for Macro-economics," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 694-724, October.
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  14. Edward A. Downe, 1987. "Minsky's Model of Financial Fragility: A Suggested Addition," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 9(3), pages 440-454, April.
  15. Steve Keen, 1995. "Finance and Economic Breakdown: Modeling Minsky's "Financial Instability Hypothesis"," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 17(4), pages 607-635, July.
  16. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
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Cited by:
  1. Datta, Soumya, 2013. "Robustness and Stability of Limit Cycles in a Class of Planar Dynamical Systems," MPRA Paper 50814, University Library of Munich, Germany.
  2. Datta, Soumya, 2013. "Convergence, cycles and complex dynamics of financing investment," MPRA Paper 52111, University Library of Munich, Germany, revised 10 Dec 2013.

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