Entrepreneurs, Banks and the Monetary Circuit: A Single Period Investigation

E. Venturino and Giuseppe Fontana

Mathematical and Computer Modelling of Dynamical Systems, 2003, vol. 9, issue 4, 451-476

Abstract: Economic fluctuations constitute a serious problem for policy makers and economists. Several theories have been developed to explain their causes. New recent literature has emphasized the idea that the level of income and employment is determined by decisions taken jointly by banks and entrepreneurs. Our aim here is to investigate the increasingly important relationship between banks and entrepreneurs in the monetary circuit. The system considered explicitly models the money supply process, in contrast to the current economic literature, in which money is introduced ex post as an exogenous disturbance. In view of the presence of several parameters, the two-dimensional model is quite complex. A complete analysis of all possible outcomes of the ? -limit sets is performed, and the circumstances under which the system explodes, collapses or tends to an equilibrium are discussed in terms of the model parameters.

Date: 2003
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DOI: 10.1076/mcmd.9.4.451.27900

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