Chaos Theory and the New Keynesian Economics

J. Barkley Rosser

The Manchester School of Economic & Social Studies, 1990, vol. 58, issue 3, 265-91

Abstract: The possibility of endogenous chaotic cycles in rational expectations models undermines New Classical arguments that macroeconomic stabilization policies will be either ineffective or inefficient. However, the possibility of chaos also weakens the ability of New Keynesian stabilization policies because of the associated forecasting difficulties. Although numerous kinds of models can generate chaotic dynamics, empirical evidence of the existence of such dynamics in economics is ambiguous. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:58:y:1990:i:3:p:265-91

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