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Chaos control in presence of financial bubbles

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  • Bella, Giovanni
  • Mattana, Paolo

Abstract

The paper shows that in the economy described by Miao and Wang (2015), with financial bubbles emerging in the banking sector, a Shilnikov chaotic attractor giving rise to unpredictable global indeterminacy can appear when the bubble bursts, resulting in a financial crisis. In this case, a suitable policy algorithm to eliminate or control the chaotic dynamics is proposed.

Suggested Citation

  • Bella, Giovanni & Mattana, Paolo, 2020. "Chaos control in presence of financial bubbles," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520302093
    DOI: 10.1016/j.econlet.2020.109314
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    References listed on IDEAS

    as
    1. Miao, Jianjun & Wang, Pengfei, 2015. "Banking bubbles and financial crises," Journal of Economic Theory, Elsevier, vol. 157(C), pages 763-792.
    2. Bella, Giovanni & Mattana, Paolo & Venturi, Beatrice, 2017. "Shilnikov chaos in the Lucas model of endogenous growth," Journal of Economic Theory, Elsevier, vol. 172(C), pages 451-477.
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    Cited by:

    1. Takao Asano & Akihisa Shibata & Masanori Yokoo, 2023. "Controlling Chaotic Fluctuations through Monetary Policy," KIER Working Papers 1091, Kyoto University, Institute of Economic Research.

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