 A Real Growth Cycle with Adaptive ExpectationsTzong-yau Lin, Wai-man Tse and Richard H. Day Chapter 18 in Profits, Deficits and Instability, 1992, pp 349-367 from Palgrave Macmillan Abstract: Abstract A real growth cycle model can be drawn up along neoclassical lines but based on adaptive expectations and temporary equilibrium instead of perfect foresight and intertemporal equilibrium as is done in most of the contemporary literature. Unlike the optimal growth version of the one sector model, which produces only monotonic growth that converges to a steady state or balanced growth path, in the adaptive case behaviour can, in addition to stable growth, exhibit periodic cycles or non-periodic, chaotic fluctuations. These various possibilities depend on the parameters of preference, productivity, expectational adjustment, the labour supply growth rate, the rate of technological advance and the rate of depreciation. When the model is viewed as a type of overlapping generations framework, cycles tend to look like 50-year Kondratieff fluctuations with one or two generations of increasing welfare followed by one or two generations that are relatively less well off. Keywords: Business Cycle; Bifurcation Diagram; Capital Stock; Sustainable Consumption; Balance Growth Path (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-11786-4_18 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-11786-4_18 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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