This paper is a follow on to our earlier papers exploring the dynamic properties of the UK continuous time macroeconometric model. This paper is focussed on policy implications. We take the position that the term "stabilization policy" implies that the economy would be unstable without policy, and hence stabilization policy only can be understood as bifurcation to stability, conditionally upon the assumption that the economy would be unstable without that policy bifurcation. We apply the methodology of mathematical bifurcation to investigate this point of view. We conclude that bifurcation selection to stability is more complicated than commonly believed to be the case in much Keynesian economics. However, this conclusion is consistent with common views in the mathematical literature on bifurcation of high dimensional systems.
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Paper provided by EconWPA in its series Macroeconomics with number
9906008.
Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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