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

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Author Info
Soon Ryoo () (University of Massachusetts, Amherst)

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Abstract

This paper presents a stock-flow consistent macroeconomic model in which fi- nancial 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. JEL Categories: E12, E32, E44

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series Working Papers with number 2009-03.

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Date of creation: Apr 2009
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Handle: RePEc:ums:papers:2009-03

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Keywords: cycles; long waves; financial fragility; stock-flow consistency;

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    Other versions:
  3. repec:cup:cbooks:9780521066310 is not listed on IDEAS
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  7. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2007. "Macrodynamics of debt regimes, financial instability and growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 563-580, July. [Downloadable!] (restricted)
  8. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
  9. Peter Skott, 2008. "Growth, instability and cycles: Harrodian and Kaleckian models of accumulation and income distribution," Working Papers 2008-12, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
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  15. Taylor, Lance & O'Connell, Stephen A, 1985. "A Minsky Crisis," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 871-85, Supp.. [Downloadable!] (restricted)
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