Chaotic Dynamics in Credit Constrained Emerging Economies

Xavier Jarque, Elisabetta Michetti and Jordi Caballé
Authors registered in the RePEc Author Service: Jordi Caballe ()

No 121, Working Papers from Barcelona School of Economics

Abstract: This paper analyzes the role of financial development as a source of endogenous instability in small open economies. By assuming that firms face credit constraints, our model displays a complex dynamic behavior for intermediate values of the parameter representing the level of financial development of the economy. The basic implication of our model is that economies experiencing a process of financial development are more unstable than both very underdeveloped and very developed economies. Our instability concept means that small shocks have a persistent effect on the long run behavior of the model and also that economies can exhibit cycles with a very high period or even chaotic dynamic patterns.

Keywords: Chaotic Dynamics; credit constraints; financial development (search for similar items in EconPapers)
JEL-codes: C62 O16 (search for similar items in EconPapers)
Date: 2015-09
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Chaotic dynamics in credit constrained emerging economies (2006)
Working Paper: Chaotic Dynamics in Credit Constrained Emerging Economies (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:121

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