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The dynamics of the NAIRU model with two switching regimes

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  • Fabio Tramontana

    ()
    (Department of Economics, University of Ancona, Italy)

  • Laura Gardini

    ()
    (Department of Economics and Quantitative Methods, University of Urbino, Italy)

  • Piero Ferri

    ()
    (Department of Economics, University of Bergamo, Italy)

Abstract

We consider a model of inflation and unemployment proposed in Ferri et al. (JEBO, 2001), in which the dynamics are described by a discontinuous piecewise linear map, made up of two branches. We shall show that the bounded dynamics may be classified in two cases: we may have either regular dynamics with stable cycles of any period or quasiperiodic trajectories, or only chaotic dynamics (pure chaos in which a unique absolutely continuous invariant ergodic measure exists, and structurally stable),in a rich variety of cyclical chaotic intervals. The main results are the analytical formulation of the border collision bifurcation curves, through which we give a complete picture of the possible outcomes of the model.

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File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_10_04.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1004.

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Length: 31 pages
Date of creation: 2010
Date of revision: 2010
Handle: RePEc:urb:wpaper:10_04

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Web page: http://www.econ.uniurb.it/
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Related research

Keywords: Phillips curve; Regime switching; NAIRU; Nonlinearities; Discontinuous maps.;

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  1. Gardini, Laura & Sushko, Iryna & Naimzada, Ahmad K., 2008. "Growing through chaotic intervals," Journal of Economic Theory, Elsevier, vol. 143(1), pages 541-557, November.
  2. Argia M. Sbordone, 2007. "Globalization and Inflation Dynamics: The Impact of Increased Competition," NBER Chapters, in: International Dimensions of Monetary Policy, pages 547-579 National Bureau of Economic Research, Inc.
  3. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical dynamics and economics," Journal of Economic Behavior & Organization, Elsevier, vol. 16(1-2), pages 37-83, July.
  4. Hommes, Cars H. & Nusse, Helena E. & Simonovits, Andras, 1995. "Cycles and chaos in a socialist economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 155-179.
  5. Luisa Corrado & Sean Holly, 2003. "Nonlinear Phillips Curves, Mixing Feedback Rules and the Distribution of Inflation and Output," CEIS Research Paper 37, Tor Vergata University, CEIS.
  6. Bohm, Volker & Kaas, Leo, 2000. "Differential savings, factor shares, and endogenous growth cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 965-980, June.
  7. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," NBER Working Papers 8940, National Bureau of Economic Research, Inc.
  8. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
  9. Ferri, Piero & Greenberg, Edward & Day, Richard H., 2001. "The Phillips curve, regime switching, and the NAIRU," Journal of Economic Behavior & Organization, Elsevier, vol. 46(1), pages 23-37, September.
  10. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-14, June.
  11. Mitra, Tapan, 2001. "A Sufficient Condition for Topological Chaos with an Application to a Model of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 133-152, January.
  12. Puu, Tonu & Gardini, Laura & Sushko, Irina, 2005. "A Hicksian multiplier-accelerator model with floor determined by capital stock," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 331-348, March.
  13. Anjan Mukherji, 2005. "Robust cyclical growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(3), pages 233-246.
  14. Matsuyama, Kiminori, 1996. "Growing Through Cycles," Economics Series 40, Institute for Advanced Studies.
  15. Fazzari, Steven & Ferri, Piero & Greenberg, Edward, 2008. "Cash flow, investment, and Keynes-Minsky cycles," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 555-572, March.
  16. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  17. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical Dynamics and Economics," Working Paper Series 293, Research Institute of Industrial Economics.
  18. Day, Richard H. & Shafer, Wayne, 1987. "Ergodic fluctuations in deterministic economic models," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 339-361, September.
  19. Hommes, Cars H., 1995. "A reconsideration of Hicks' non-linear trade cycle model," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 435-459, December.
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Citations

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Cited by:
  1. Fabio Tramontana & Frank Westerhoff & Laura Gardini, 2010. "On the complicated price dynamics of a simple one-dimensional discontinuous financial market model with heterogeneous interacting traders," Working Papers 1005, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2010.
  2. Piero Ferri, 2013. "Income distribution and debts in a fragile economy: market processes and macro constraints," Journal of Economic Interaction and Coordination, Springer, vol. 8(2), pages 219-230, October.

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