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A simple model of growth cycles with technology choice

Yosuke Umezuki and Masanori Yokoo

Journal of Economic Dynamics and Control, 2019, vol. 100, issue C, 164-175

Abstract: In this study, we develop a simple, computable overlapping generations model that exhibits endogenous fluctuations. The key assumption is that a firm can choose from multiple technologies of production. Since the model reduces to a piecewise linear map on the unit interval, it allows us to conduct an in-depth analysis of its dynamic properties. Particularly, this piecewise linearization reveals the ability of the model to exhibit periodic attracting cycles of an arbitrarily large period as well as non-periodic attractors. Furthermore, it is demonstrated that the occurrence of periodic patterns is completely characterized by the rotation number or the “devil’s staircase.”

Keywords: Technology choice; Piecewise linearity; Endogenous fluctuations; Overlapping generations model; Rotation number; Devil’s staircase (search for similar items in EconPapers)
JEL-codes: C62 E32 O14 O41 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jedc.2018.11.006

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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