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Credit market imperfection, financial market globalization, and catastrophic transition

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  • Agliari, Anna
  • Rillosi, Francesco
  • Vachadze, George

Abstract

We analyze a two-country overlapping generations model with integrated financial markets. We assume heterogeneous countries with respect to the population size, to the technology and to the level of credit market imperfection. We show that a subcritical Neimark–Sacker bifurcation may occur and that, before its destabilization, a stable steady state coexists with two invariant closed curves – one attracting and one repelling. In this way we reinforce existing results on the implications of the credit market imperfection that not only causes amplification and persistence of macroeconomic shocks, but also leads to significant changes in the long run behavior of the economy (i.e., catastrophic transition).

Suggested Citation

  • Agliari, Anna & Rillosi, Francesco & Vachadze, George, 2015. "Credit market imperfection, financial market globalization, and catastrophic transition," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 108(C), pages 41-62.
  • Handle: RePEc:eee:matcom:v:108:y:2015:i:c:p:41-62
    DOI: 10.1016/j.matcom.2014.05.009
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    1. Anna Agliari & George Vachadze, 2011. "Homoclinic and Heteroclinic Bifurcations in an Overlapping Generations Model with Credit Market Imperfection," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 241-260, October.
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    Cited by:

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    2. Kikuchi, Tomoo & Stachurski, John & Vachadze, George, 2018. "Volatile capital flows and financial integration: The role of moral hazard," Journal of Economic Theory, Elsevier, vol. 176(C), pages 170-192.
    3. George Vachadze, 2021. "Financial development, income and income inequality," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(3), pages 589-628, July.

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    More about this item

    Keywords

    Catastrophic transition; Crater bifurcation; Credit market imperfection; Financial globalization;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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