IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/4817.html
   My bibliography  Save this paper

A two-dimensional non-equilibrium dynamic model

Author

Listed:
  • Gomes, Orlando

Abstract

This paper develops a non-equilibrium dynamic model (NEDyM) with Keynesian features (it allows for a disequilibrium between output and demand and it considers a constant marginal propensity to consume), but where production is undertaken under plain neoclassical conditions (a constant returns to scale production function, with the stocks of capital and labor fully employed, is assumed). The model involves only two endogenous / prognostic variables: the stock of physical capital per unit of labor and a goods inventory measure. The two-dimensional system allows for a careful analysis of local and global dynamics. Points of bifurcation and long-term cyclical motion are identified. The main conclusion is that the disequilibrium hypothesis leads to persistent fluctuations generated by intrinsic deterministic factors.

Suggested Citation

  • Gomes, Orlando, 2007. "A two-dimensional non-equilibrium dynamic model," MPRA Paper 4817, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4817
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/4817/1/MPRA_paper_4817.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stutzer, Michael J., 1980. "Chaotic dynamics and bifurcation in a macro model," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 353-376, May.
    2. Cellarier, Laurent, 2006. "Constant gain learning and business cycles," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 51-85, March.
    3. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 529-538.
    4. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    5. Goeree, Jacob K. & Hommes, Cars H., 2000. "Heterogeneous beliefs and the non-linear cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 761-798, June.
    6. N. G. Mankiw, 2009. "The Macroeconomist as Scientist and Engineer," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 5.
    7. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 823-838.
    8. Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2006. "An Evolutionary Model of Endogenous Business Cycles," Computational Economics, Springer;Society for Computational Economics, vol. 27(1), pages 3-34, February.
    9. Hallegatte, Stéphane & Ghil, Michael & Dumas, Patrice & Hourcade, Jean-Charles, 2008. "Business cycles, bifurcations and chaos in a neo-classical model with investment dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 57-77, July.
    10. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    11. Cazzavillan, Guido & Lloyd-Braga, Teresa & Pintus, Patrick A., 1998. "Multiple Steady States and Endogenous Fluctuations with Increasing Returns to Scale in Production," Journal of Economic Theory, Elsevier, vol. 80(1), pages 60-107, May.
    12. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    13. Stephanie Schmitt-Grohe, 2000. "Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 90(5), pages 1136-1159, December.
    14. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    15. Guo, Jang-Ting & Lansing, Kevin J., 2002. "Fiscal Policy, Increasing Returns, And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 6(5), pages 633-664, November.
    16. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    17. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124, National Bureau of Economic Research, Inc.
    18. Deneckere, Raymond & Pelikan, Steve, 1986. "Competitive chaos," Journal of Economic Theory, Elsevier, vol. 40(1), pages 13-25, October.
    19. Christiano, Lawrence J. & G. Harrison, Sharon, 1999. "Chaos, sunspots and automatic stabilizers," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 3-31, August.
    20. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    21. Lloyd-Braga, Teresa & Nourry, Carine & Venditti, Alain, 2007. "Indeterminacy in dynamic models: When Diamond meets Ramsey," Journal of Economic Theory, Elsevier, vol. 134(1), pages 513-536, May.
    22. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    23. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    24. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    25. Guido Cazzavillan & Patrick A. Pintus, 2004. "Robustness of Multiple Equilibria in OLG Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 456-475, April.
    26. Kazuo Nishimura & Makoto Yano, 2012. "Non-linear Dynamics and Chaos in Optimal Growth: An Example," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 127-150, Springer.
    27. repec:cup:macdyn:v:6:y:2002:i:5:p:633-64 is not listed on IDEAS
    28. Onozaki, Tamotsu & Sieg, Gernot & Yokoo, Masanori, 2000. "Complex dynamics in a cobweb model with adaptive production adjustment," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 101-115, February.
    29. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    30. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76(4), pages 678-678.
    31. Nishimura, Kazuo & Yano, Makoto, 1994. "Optimal Chaos, Nonlinearity and Feasibility Conditions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 689-704, August.
    32. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521551861.
    33. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521558747.
    34. Nishimura, Kazuo & Sorger, Gerhard & Yano, Makoto, 1994. "Ergodic Chaos in Optimal Growth Models with Low Discount Rates," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 705-717, August.
    35. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-414, June.
    36. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    37. Goenka, Aditya & Poulsen, Odile, 2004. "Factor Intensity Reversal and Ergodic Chaos," Working Papers 04-13, University of Aarhus, Aarhus School of Business, Department of Economics.
    38. Jess Benhabib & Richard H. Day, 1981. "Rational Choice and Erratic Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 459-471.
    39. Aloi, Marta & Dixon, Huw D. & Lloyd-Braga, Teresa, 2000. "Endogenous fluctuations in an open economy with increasing returns to scale," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 97-125, January.
    40. Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
    41. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    42. Onozaki, Tamotsu & Sieg, Gernot & Yokoo, Masanori, 2003. "Stability, chaos and multiple attractors: a single agent makes a difference," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1917-1938, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Orlando Gomes, 2010. "Consumer confidence, endogenous growth and endogenous cycles," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(4), pages 377-404, September.
    2. Orlando Gomes, 2006. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, November.
    3. Orlando Gomes, 2006. "Local Bifurcations and Global Dynamics in a Solow-type Endogenous Business Cycles Model," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 91-127, May.
    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. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 33(6), pages 437-468, November.
    6. Gomes, Orlando, 2008. "Too much of a good thing: Endogenous business cycles generated by bounded technological progress," Economic Modelling, Elsevier, vol. 25(5), pages 933-945, September.
    7. Gomes, Orlando, 2007. "Externalities in R&D: a route to endogenous fluctuations," MPRA Paper 2850, University Library of Munich, Germany.
    8. Orlando Gomes, 2010. "Deterministic randomness in a model of finance and growth," Journal of Evolutionary Economics, Springer, vol. 20(1), pages 95-114, January.
    9. repec:ebl:ecbull:v:15:y:2007:i:1:p:1-8 is not listed on IDEAS
    10. N. G. Mankiw, 2009. "The Macroeconomist as Scientist and Engineer," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 5.
    11. N. Gregory Mankiw, 2008. "Makroekonomista jako naukowiec i inżynier," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 85-106.
    12. Gao, Yang & Gong, Gang, 2020. "Stabilizing and destabilizing mechanisms: A new perspective to understand business cycles," Economic Modelling, Elsevier, vol. 93(C), pages 51-68.
    13. Yuli Radev, 2015. "New dynamic disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 65-90.
    14. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages 45-61, May.
    15. Tamotsu Onozaki, 2018. "Nonlinearity, Bounded Rationality, and Heterogeneity," Springer Books, Springer, number 978-4-431-54971-0, February.
    16. Slanicay Martin, 2014. "Some Notes on Historical, Theoretical, and Empirical Background of DSGE Models," Review of Economic Perspectives, Sciendo, vol. 14(2), pages 145-164, June.
    17. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters, in: Microfoundations Reconsidered, chapter 6, Edward Elgar Publishing.
    18. Pedro Garcia Duarte & Gilberto Tadeu Lima, 2012. "Microfoundations Reconsidered," Books, Edward Elgar Publishing, number 14869.
    19. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    20. Orlando Gomes, 2008. "Time Preference and Cyclical Endogenous Growth in an AK Growth Model," Notas Económicas, Faculty of Economics, University of Coimbra, issue 28, pages 32-55, December.
    21. Gomes, Orlando, 2007. "Time preference and cyclical endogenous growth," MPRA Paper 3282, University Library of Munich, Germany.

    More about this item

    Keywords

    NEDyM; Endogenous business cycles; Nonlinear growth; Keynesian macroeconomics; Cyclical dynamics and chaos;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:4817. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.