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Nonlinearity and chaos in economic models: implications for policy decisions

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  • James B. Bullard
  • Alison Butler

Abstract

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.

Suggested Citation

  • James B. Bullard & Alison Butler, 1992. "Nonlinearity and chaos in economic models: implications for policy decisions," Working Papers 1991-002, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1991-002
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    References listed on IDEAS

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    Cited by:

    1. Orlando Gomes, 2008. "Imperfect Demand Expectations and Endogenous Business Cycles," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 11(1), pages 37-59, May.
    2. William A. Barnett & Alfredo Medio & Apostolos Serletis, 1997. "Nonlinear and Complex Dynamics in Economics," Econometrics 9709001, EconWPA.
    3. William A. Barnett & Taniya Ghosh, 2014. "Stability analysis of Uzawa–Lucas endogenous growth model," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(1), pages 33-44, April.
    4. Orlando Gomes, 2007. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, January.
    5. Orlando Gomes, 2006. "Endogenous Business Cycles in the Ramsey Growth Model," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 9(2), pages 13-36, November.
    6. Barnett, William A. & Serletis, Apostolos & Serletis, Demitre, 2015. "Nonlinear And Complex Dynamics In Economics," Macroeconomic Dynamics, Cambridge University Press, pages 1749-1779.
    7. Atanas Christev, 2006. "Learning Hyperinflations," Computing in Economics and Finance 2006 475, Society for Computational Economics.
    8. Orlando Gomes, 2006. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, November.
    9. Catherine Kyrtsou & Costas Vorlow, 2008. "Modelling non-linear comovements between time series," Working Papers 2008_01, Durham University Business School.
    10. Gomes, Orlando, 2008. "Too much of a good thing: Endogenous business cycles generated by bounded technological progress," Economic Modelling, Elsevier, pages 933-945.
    11. Andrei Kapaev, 2013. "Remark on repo and options," Papers 1311.5211, arXiv.org.
    12. Garcia, Alfredo Daniel & Szybisz, Martin Andres, 2017. "Size effect in transitional dynamics of the banking network," MPRA Paper 80195, University Library of Munich, Germany.
    13. Serletis, Apostolos, 2016. "Introduction To Macroeconomic Dynamics Special Issue On Complexity In Economic Systems," Macroeconomic Dynamics, Cambridge University Press, vol. 20(02), pages 461-465, March.
    14. Kyrtsou, Catherine & Vorlow, Costas, 2009. "Modelling non-linear comovements between time series," Journal of Macroeconomics, Elsevier, pages 200-211.
    15. Franz Alonso Hamann S., 1996. "Puede Explicarse El Precio Externo Del Café Con Un Modelo Econometrico No Lineal?," BORRADORES DE ECONOMIA 003408, BANCO DE LA REPÚBLICA.
    16. Vivaldo M. Mendes & Diana A. Mendes, 2006. "Active Interest Rate Rules and the Role of Stabilization Policy R&D Tax Credits," Working Papers Series 1 ercwp0208, ISCTE-IUL, Business Research Unit (BRU-IUL).
    17. Kenneth Kasa & Mark M. Spiegel, 2008. "The role of relative performance in bank closure decisions," Economic Review, Federal Reserve Bank of San Francisco, pages 17-29.
    18. Guo, Jang-Ting & Lansing, Kevin J., 2002. "Fiscal Policy, Increasing Returns, And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, pages 633-664.
    19. Sorger, Gerhard, 1998. "Imperfect foresight and chaos: an example of a self-fulfilling mistake," Journal of Economic Behavior & Organization, Elsevier, pages 363-383.
    20. Martha Misas Arango & Hugo Liveros Camacho & Jose Dario Uribe Escobar, 1994. "Especificación Y Estabilidad De La Demanda Por Dinero En Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 13(25), pages 97-120, June.

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    Macroeconomics ; Economic stabilization;

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