Chaos in a Model of Credit Cycles with Good and Bad Projects

Iryna Sushko (), Laura Gardini () and Kiminori Matsuyama
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Iryna Sushko: Institute of Mathematics NASU and Kyiv School of Economics,Kyiv,Ukraine

No 1405, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: We consider a credit cycle model introduced by Matsuyama, which is defined by a one-dimensional piecewise smooth map with upward, downward and flat branches. We offer a detailed analysis of this model for the case where asymp- totic dynamics does not involve the flat branch, under the additional assumption that the production function is Cobb-Douglas. In particular, using skew tent map (which is a one-dimensional map defined by two linear functions) as a border collision normal form we obtain conditions of abrupt transition from an attracting fixed point to an attracting cycle or a chaotic attractor (cyclic chaotic intervals). These conditions allow us to describe the overall bifurcation structure of the parameter space of the map in a neighborhood of the boundary related to the border collision bifurcation of the fixed point. Such a structure confirms, in particular, that chaotic attractors of the considered map are robust, that is, they are persistent under parameter perturbations.

Keywords: One-dimensional piecewise smooth map; Border collision bifurcation; Skew tent map; Borrower net worth; Composition of credit flows; Financial instability. (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014, Revised 2014
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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