Feedback dynamic control for exiting a debt-induced spiral in a deterministic Keen model

Ivan Perez Avellaneda, Francisco Rosales and Luis A Duffaut Espinosa

PLOS ONE, 2024, vol. 19, issue 2, 1-23

Abstract: The Keen model is designed to represent an economy as a dynamic system governed by the interactions between private debt, wage share, and employment rate. When certain conditions are met, the model can lead to a debt spiral, which accurately mimics the impact of a financial crisis on an economy. This manuscript presents a recipe for breaking this spiral by expressing Keen’s model as an affine nonlinear system that can be modified through policy interventions. We begin by considering critical initial conditions that resemble a financial crisis to achieve this goal. We then locate a desired point within the system’s vector field that leads to a desirable equilibrium and design a path towards it. This path is later followed using one-step-ahead optimal control. We illustrate our approach by presenting simulated control scenarios.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0295859 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 95859&type=printable (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0295859

DOI: 10.1371/journal.pone.0295859

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().