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Nonlinearity and Chaos in Economic Models: Implications for Policy Decisions

  • Bullard, James
  • Butler, Alison

This survey paper discusses the policy implications that can be expected from the recent research on nonlinearity and chaos in economic models. Expected policy implications are interpreted as a driving force behind the recent proliferation of research in this area. In general, it appears that no new justification for policy intervention is developed in models of endogenous fluctuations, although this conclusion depends in part on the definition of equilibrium. When justified, however, policy tends to be very effective in these models. Copyright 1993 by Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 103 (1993)
Issue (Month): 419 (July)
Pages: 849-67

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Handle: RePEc:ecj:econjl:v:103:y:1993:i:419:p:849-67
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  1. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  2. Kelsey, David, 1988. "The Economics of Chaos or the Chaos of Economics," Oxford Economic Papers, Oxford University Press, vol. 40(1), pages 1-31, March.
  3. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  4. Scheinkman, Jose A, 1990. "Nonlinearities in Economic Dynamics," Economic Journal, Royal Economic Society, vol. 100(400), pages 33-48, Supplemen.
  5. Becker, R.C. & Foias, C., 1992. "The Local Bifurcation of Ramsey Equilibrium," Papers 92-002, Indiana - Center for Econometric Model Research.
  6. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  7. Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
  8. William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005.
  9. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
  10. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
  11. Boldrin, Michele & Woodford, Michael, 1990. "Equilibrium models displaying endogenous fluctuations and chaos : A survey," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 189-222, March.
  12. Ramsey, J.B. & Sayers, C.L. & Rothman, P., 1988. "The Statistical Properties Of Dimension Calculations Using Small Data Sets: Some Economic Applications," Papers 15, Houston - Department of Economics.
  13. Baumol, William J & Benhabib, Jess, 1989. "Chaos: Significance, Mechanism, and Economic Applications," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 77-105, Winter.
  14. LeBaron, B., 1991. "Empirical Evidence for Nonlinearities and Chaos in Economic Time Series: A Summary of Recent Results," Working papers 9117, Wisconsin Madison - Social Systems.
  15. Alison Butler, 1990. "A methodological approach to chaos: are economists missing the point?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 36-48.
  16. Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-56, July-Aug..
  17. Michael Woodford, 1990. "Equilibrium Models of Endogenous Fluctuations: an Introduction," NBER Working Papers 3360, National Bureau of Economic Research, Inc.
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