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Long waves and short cycles in a model of endogenous financial fragility

Listed author(s):
  • Soon Ryoo

    ()

    (University of Massachusetts, Amherst)

This paper presents a stock-flow consistent macroeconomic model in which fi- nancial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms’ and households’ financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves. JEL Categories: E12, E32, E44

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File URL: http://www.umass.edu/economics/publications/2009-03.pdf
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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2009-03.

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Date of creation: Apr 2009
Handle: RePEc:ums:papers:2009-03
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Web page: http://www.umass.edu/economics
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