Financial crisis spread, economic growth and unemployment: a mathematical model

Tadmon Calvin () and Njike Tchaptchet Eric Rostand ()
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Tadmon Calvin: Department of Mathematics and Computer Science, University of Dschang, Dschang, Cameroon
Njike Tchaptchet Eric Rostand: Department of Mathematics and Computer Science, University of Dschang, Dschang, Cameroon

Studies in Nonlinear Dynamics & Econometrics, 2023, vol. 27, issue 2, 147-170

Abstract: The unemployment is the main channel through which the economic and financial crises influence the social development. In this paper, we propose a mathematical model to study the interactions between financial crisis spread, economic growth and unemployment. We also solve an optimal control problem focusing on the minimization, at the lowest cost, of the adverse effects of the financial crisis. The analysis of the model leads us to two equilibria: (1) a stress free equilibrium, where the economy and the employment are optimal, and (2) a stressed equilibrium. We obtain a theoretical confirmation of Okun’s law and a formula to compute the minimum reservation wage in terms of model parameters. Numerical simulations are performed to illustrate the theoretical results obtained.

Keywords: economic growth; financial crisis spread; mathematical modeling; numerical simulations; Okun’s law; unemployment (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/snde-2021-0081

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