Dynamical Coupling, Nonlinear Accelerator and the Persistence of Business Cycles
AbstractMany of the research questions and research programs that were posed and suggested by Richard Goodwin are still highly relevant for various methodological, empirical and theoretical reasons. In this paper, we address the issue of whether highly articulated and complex economic interactions can be represented by a simplified low dimensional model. We follow the valuable insight offered by Goodwin (1947) concerning the importance of dynamical coupling and the potential role of analog and/or digital computers in studying them fruitfully. Here, we extend the nonlinear, flexible accelerator - dynamic multiplier model of business cycle by Goodwin (1951), to the case in which these economies are coupled through trade. The dynamics implied by the coupling are studied in analogy with the well known Fermi-Pasta-Ulam problem (Fermi et al., 1955). We show that for nonlinear economies, even when they are exactly the same, i.e. having the same structural behavioral equations, the very rich dynamics depend crucially on the initial conditions. This result is somewhat unexpected.
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Bibliographic InfoPaper provided by ASSRU - Algorithmic Social Science Research Unit in its series ASSRU Discussion Papers with number 1214.
Date of creation: 2012
Date of revision:
Business cycles; coupled economies; analog and digital computations; Fermi-Pasta-Ulam problem; computable economics; algorithmic social sciences; Richard Goodwin; analogy and induction;
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