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Cycles and Crises in a Model of Debt-financed Investment-led Growth

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  • Datta, Soumya

Abstract

The paper demonstrates possibilities of both convergence to the steady state and emergence of stable growth cycles around it in a simple macrodynamic model of debt-financed investment-led growth. The growth cycles are robust and are generated endogenously, either due to the existence of a supercritical Andronov-Hopf bifurcation, or due to the global stability condition through an application of the Poincaré-Bendixson theorem. The emergence of multiple limit cycles is also observed under certain conditions. The possibility of a deterioration of financial variables during a boom, with the resulting financial crisis providing an endogenous ceiling to a business cycle is examined in this context.

Suggested Citation

  • Datta, Soumya, 2012. "Cycles and Crises in a Model of Debt-financed Investment-led Growth," MPRA Paper 50200, University Library of Munich, Germany, revised 12 Dec 2012.
  • Handle: RePEc:pra:mprapa:50200
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    File URL: https://mpra.ub.uni-muenchen.de/50200/1/MPRA_paper_50200.pdf
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    References listed on IDEAS

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    Cited by:

    1. Datta, Soumya, 2013. "Robustness and Stability of Limit Cycles in a Class of Planar Dynamical Systems," MPRA Paper 50814, University Library of Munich, Germany.
    2. Greg Hannsgen & Tai Young-Taft, 2015. "Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility," Economics Working Paper Archive wp_839, Levy Economics Institute.
    3. Datta, Soumya, 2013. "Convergence, cycles and complex dynamics of financing investment," MPRA Paper 52111, University Library of Munich, Germany, revised 10 Dec 2013.

    More about this item

    Keywords

    Growth cycles; Financial crisis; Fisher; Minsky; Andronov-Hopf bifurcation; Limit cycles.;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • 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
    • G01 - Financial Economics - - General - - - Financial Crises

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