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Bifurcation Analysis of an Endogenous Growth Model

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  • Barnett, William
  • Ghosh, Taniya

Abstract

This paper analyzes the dynamics of a variant of Jones (2002) semi-endogenous growth model within the feasible parameter space. We derive the long run growth rate of the economy and do a detailed bifurcation analysis of the equilibrium. We show the existence of codimension-1 bifurcations (Hopf, Branch Point, Limit Point of Cycles, and Period Doubling) and codimension-2 (Bogdanov-Takens and Generalized Hopf) bifurcations within the feasible parameter range of the model. It is important to recognize that bifurcation boundaries do not necessarily separate stable from unstable solution domains. Bifurcation boundaries can separate one kind of unstable dynamics domain from another kind of unstable dynamics domain, or one kind of stable dynamics domain from another kind (called soft bifurcation), such as bifurcation from monotonic stability to damped periodic stability or from damped periodic to damped multiperiodic stability. There are not only an infinite number of kinds of unstable dynamics, some very close to stability in appearance, but also an infinite number of kinds of stable dynamics. Hence subjective prior views on whether the economy is or is not stable provide little guidance without mathematical analysis of model dynamics. When a bifurcation boundary crosses the parameter estimates’ confidence region, robustness of dynamical inferences from policy simulations are compromised, when conducted, in the usual manner, only at the parameters’ point estimates.

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  • Barnett, William & Ghosh, Taniya, 2013. "Bifurcation Analysis of an Endogenous Growth Model," MPRA Paper 50131, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:50131
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    Cited by:

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    2. Bosi, Stefano & Desmarchelier, David, 2018. "Natural cycles and pollution," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 10-20.
    3. Growiec, Jakub & McAdam, Peter & Mućk, Jakub, 2018. "Endogenous labor share cycles: Theory and evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 87(C), pages 74-93.
    4. Meir Russ, 2017. "The Trifurcation of the Labor Markets in the Networked, Knowledge-Driven, Global Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 672-703, June.
    5. 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.
    6. Barnett, William A. & Chen, Guo, 2015. "Bifurcation of Macroeconometric Models and Robustness of Dynamical Inferences," Foundations and Trends(R) in Econometrics, now publishers, vol. 8(1-2), pages 1-144, September.

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    More about this item

    Keywords

    bifurcation; endogenous growth; Jones growth model; Hopf; inference robustness; dynamics; stability.;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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