First-passage time for stability analysis of the Kaldor model

Peter C. Chu

Chaos, Solitons & Fractals, 2006, vol. 27, issue 5, 1355-1368

Abstract: Every economic model should include an estimate of its stability and predictability. A new measure, the first passage time (FPT) which is defined as the time period when the model error first exceeds a pre-determined criterion (i.e., the tolerance level), is proposed here to estimate the model predictability. A theoretical framework is developed to determine the mean and variance of FPT. The classical Kaldor model is taken as an example to show the robustness of using FPT as a quantitative measure for identifying the model stability.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:27:y:2006:i:5:p:1355-1368

DOI: 10.1016/j.chaos.2005.04.115

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