Production, Capital Stock, and Price Level Dynamics in the Light of Kaldorian Model

Výroba, kapitál a dynamika cen ve světle Kaldorova modelu

Jan Kodera and Miloslav Vošvrda

Acta Oeconomica Pragensia, 2007, vol. 2007, issue 4, 79-87

Abstract: The purpose of this paper is to study a price level dynamics in a simple fourequation model. A basis of this model is developed from dynamical Kaldorian model which could be noticed very frequently in works of non-linear economic dynamics. Our approach is traditional. The difference is observed in a choice of an investment function. The investment function depending on the difference of logarithm of production and logarithm of capital (logarithm of the productivity of capital) is in a form of the logistic function. These two equations create relatively closed sub-model generating both production and capital stock trajectories. Two other equations describe the price level dynamics as a consequence of money market disequilibrium and continuously adaptive expectation of inflation. Our investigation is firstly aimed to core model dynamics, i.e., a dynamics of the production and capital stock. Secondly is to analyze dynamics of the model as a whole, i.e., to the first part is superadded the price dynamics and expected inflation dynamics depending on both an adaptation parameter of the commodity market and a parameter of the expectation. Thirdly, we compute Lyapunov exponents for simple model of closed economy showing its chaotic behavior.

Keywords: investment ratio; propensity to save; expected inflation; nonlinear system; price dynamics (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Date: 2007
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DOI: 10.18267/j.aop.77

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