Numerical Exploration of Kaldorian Interregional Macrodynamics: Enhanced Stability and Predominance of Period Doubling under Flexible Exchange Rates

Toichiro Asada, Christos Douskos, Vassilis Kalantonis and Panagiotis Markellos

Discrete Dynamics in Nature and Society, 2010, vol. 2010, 1-29

Abstract:

We present a discrete two-regional Kaldorian macrodynamic model with flexible exchange rates and explore numerically the stability of equilibrium and the possibility of generation of business cycles. We use a grid search method in two-dimensional parameter subspaces, and coefficient criteria for the flip and Hopf bifurcation curves, to determine the stability region and its boundary curves in several parameter ranges. The model is characterized by enhanced stability of equilibrium, while its predominant asymptotic behavior when equilibrium is unstable is period doubling. Cycles are scarce and short-lived in parameter space, occurring at large values of the degree of capital movement . By contrast to the corresponding fixed exchange rates system, for cycles to occur sufficient amount of trade is required together with high levels of capital movement. Rapid changes in exchange rate expectations and decreased government expenditure are factors contributing to the creation of interregional cycles. Examples of bifurcation and Lyapunov exponent diagrams illustrating period doubling or cycles, and their development into chaotic attractors, are given. The paper illustrates the feasibility and effectiveness of the numerical approach for dynamical systems of moderately high dimensionality and several parameters.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:263041

DOI: 10.1155/2010/263041

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