Inverse Limits and Models with Ill-Defined Forward Dynamics

David Stockman, Judy Kennedy () and James A. Yorke
Additional contact information
Judy Kennedy: Department of Mathematical Science, University of Delaware.
James A. Yorke: Institute for Physical Science and Technology, University of Maryland, College Park,

No 05-06, Working Papers from University of Delaware, Department of Economics

Abstract: Some economic models like the cash-in-advance model of money have the property that the dynamics are ill-defined going forward in time, but well-defined going backward in time. In this paper, we apply the theory of inverse limits to characterize topologically all possible solutions to a dynamic economic model with this property. We show that such techniques are particularly well-suited for analyzing the dynamics going forward in time even though the dynamics are ill-defined in this direction. In particular, we analyze the inverse limit of the cash-in-advance model of money and illustrate how information about the inverse limit is useful for detecting or ruling out complex dynamics.

Keywords: cash-in-advance; chaos; inverse limits; continuum theory. (search for similar items in EconPapers)
JEL-codes: C6 E3 E4 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2005
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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