Resource title

Border Collision Bifurcations in Boom and Bust Cycles

Resource image

image for OpenScout resource :: Border Collision Bifurcations in Boom and Bust Cycles

Resource description

Boom and bust cycles are widely documented in the literature on industry dynamics. Rigidities and delays in capacity adjustment in combination with bounded rational behavior have been identified as central driving forces. We construct a model that features only these two elements and we show that this is indeed sufficient to reproduce some stylized facts of a boom and bust cycle. The bifurcation diagrams summarizing the dynamic behavior reveal complex cycles and in particular also abrupt changes in the nature of these cycles. We apply new insights from the mathematical theory of piecewise smooth dynamic systems - in particular, results from the theory of border collision bifurcations - and show that the very existence of borders such as capacity constraints or nonnegativity constraints may lie behind abrupt changes in the dynamic behavior of economic variables. (author's abstract) ; Series: Department of Economics Working Paper Series

Resource author

Ingrid Kubin, Laura Gardini

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/3490/1/wp137.pdf

Resource license

Adapt according to the license agreement. Always reference the original source and author.