Interacting Two-Country Business Fluctuations

T. Asada, Carl Chiarella (), Peter Flaschel and Reiner Franke
Additional contact information
Peter Flaschel: Department of Economics, University of Bielefeld

No 128, Working Paper Series from School of Finance and Economics, University of Technology, Sydney

Abstract: In this paper we investigate the closed-economy Keynes-Wicksell-Goodwin model of Chiarella and Flaschel (2000) for the case of two interacting open economies. We introduce these coupled two-country KWG dynamics on the extensive form level by means of a subdivision into nine modules describing the behavioral equations, the laws of motion and the identities or budget equations of the model. We then derive their intensive form representation and the 10 laws of motions of the model on the basis of certain simplifying asumptions. Thereafter we present the uniquely determined steady state solution of the dynamics and discuss in a mathematically informal way its stability properties, concerning asymptotic stability and loss of stability by way of super- or subcritical Hopf-bifurcations. In a final section we explore numerically a variety of situations of interacting real and financial cycles, where the steady state is locally repelling, but where the overall dynamics are bounded in an economically meaningful domain by means of a kinked money wage Phillips curve, exhibiting downward rigidity of the money-wage, coupled with upward flexibility of the usual type.

Keywords: interacting kwg economies; stability; persistent cycles; coupled oscillators (search for similar items in EconPapers)
JEL-codes: E12 E32 (search for similar items in EconPapers)
Date: 2003-05-01
View list of references

Downloads: (external link)
http://www.business.uts.edu.au/finance/research/wpapers/wp128.pdf (application/pdf)

Related works:
Working Paper: Interacting Two-Country Business Fluctuations
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:uts:wpaper:128

Access Statistics for this paper

More papers in Working Paper Series from School of Finance and Economics, University of Technology, Sydney
Address: PO Box 123, Broadway, NSW 2007, Australia
Contact information at EDIRC.
Series data maintained by Duncan Ford ().