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The dynamics of the NAIRU model with two switching regimes

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Author Info

  • 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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References

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  1. 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.
  2. Matsuyama, Kiminori, 1996. "Growing Through Cycles," Economics Series 40, Institute for Advanced Studies.
  3. 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.
  4. 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.
  5. Argia M. Sbordone, 2008. "Globalization and inflation dynamics: the impact of increased competition," Staff Reports 324, Federal Reserve Bank of New York.
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  7. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical Dynamics and Economics," Working Paper Series 293, Research Institute of Industrial Economics.
  8. 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.
  9. Laurence Ball & N Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Economics Working Paper Archive 475, The Johns Hopkins University,Department of Economics.
  10. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
  11. 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.
  12. 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.
  13. Gardini, Laura & Sushko, Iryna & Naimzada, Ahmad K., 2008. "Growing through chaotic intervals," Journal of Economic Theory, Elsevier, vol. 143(1), pages 541-557, November.
  14. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
  15. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-14, June.
  16. 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.
  17. 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.
  18. Day, Richard H. & Pianigiani, Giulio, 1991. "Statistical dynamics and economics," Journal of Economic Behavior & Organization, Elsevier, vol. 16(1-2), pages 37-83, July.
  19. 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.
  20. 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.
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Citations

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Cited by:
  1. Elena Olmedo, 2014. "Forecasting Spanish Unemployment Using Near Neighbour and Neural Net Techniques," Computational Economics, Society for Computational Economics, vol. 43(2), pages 183-197, February.
  2. 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.
  3. 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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