The Foley Liquidity / Profit-Rate Cycle Model Reconsidered

Helmar Moreira, Ricardo Araujo and Peter Flaschel

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we reconsider the Foley model of Liquidity / Profit-Rate Cycles where such cycles are generated as bifurcations from initially attracting steady states if a parameter of the model crosses a critical value, for example the growth rate of money supply as in the Foley paper. We employ a slightly modified version of the Foley model and provide sufficient conditions for the local asymptotic stability of its balanced growth path. A second theorem then shows the existence of a Hopf-bifurcation derived from such a stable situation by decreasing the growth rate of liquidity to a sufficient degree. The generated cycles are studied from the numerical point of view in addition.

Keywords: Liquidity / Profit-Rate Cycle; Stability Conditions; Hopf-bifurcation. (search for similar items in EconPapers)
JEL-codes: E41 E64 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-mac
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