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A Metzlerian business cycle model with nonlinear heterogeneous expectations

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  • Wegener, Michael
  • Westerhoff, Frank
  • Zaklan, Georg

Abstract

Metzler's model is an important contribution to our understanding of the dynamics of business cycles. In his model, the production of consumption goods depends on expected future sales. However, Metzler assumes that producers are homogeneous and follow a simple expectation formation rule. Taking into account that in reality producers might not only follow several expectation formation rules, but might also even switch between them, we reformulate Metzler's original model. As it turns out endogenous business cycles may emerge within our model, i.e. changes in production and inventory are (quasi-)periodic for certain parameter combinations.

Suggested Citation

  • Wegener, Michael & Westerhoff, Frank & Zaklan, Georg, 2009. "A Metzlerian business cycle model with nonlinear heterogeneous expectations," Economic Modelling, Elsevier, vol. 26(3), pages 715-720, May.
  • Handle: RePEc:eee:ecmode:v:26:y:2009:i:3:p:715-720
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    References listed on IDEAS

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    Cited by:

    1. Michael Wegener & Frank Westerhoff, 2012. "Evolutionary competition between prediction rules and the emergence of business cycles within Metzler’s inventory model," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 251-273, April.
    2. Michael Wegener, 2014. "Heterogeneous expectations and debt in a growth model for a small open economy," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 125-136, April.

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