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Complex dynamics in the market for loans

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  • Nivedita Mukherji

    (Oakland University)

Abstract

This paper demonstrates that endogenous fluctuations are possible in the market for loans. In the context of a three-period overlapping generations economy, the deposit rates offered to lenders are found to exhibit complex dynamics when financial intermediaries mediate borrowing and lending. Constant relative risk aversion of savers is found to generate a first-order nonlinear equation in the deposit rates. Concavity and convexity assumptions of production and savings functions are found to generate a type of dynamic relationship between the loan rates that is well known in the literature for generating complex dynamics. While the main analysis is conducted with general functions, an example is provided to support the theory presented.

Suggested Citation

  • Nivedita Mukherji, 2022. "Complex dynamics in the market for loans," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 45(1), pages 83-99, June.
    • Handle: RePEc:spr:decfin:v:45:y:2022:i:1:d:10.1007_s10203-021-00341-y
    DOI: 10.1007/s10203-021-00341-y
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    Keywords

    Nonlinear dynamics; Credit markets;

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