A Traffic-Jam model of Recessions

Jennifer La'O

No 978, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: I study an economy in which firms are interconnected and there is strategic complementarity in production decisions. Firms use the output of other firms as inputs to their own production. Furthermore, they make production choices before knowing the demand they face. The simultaneity of these production decisions leads to a stable dynamic system under certain regions of the parameter space. If parameters move around, however, this leads to a bifurcation in which the system becomes unstable. In this region, small pertubations can lead to stop-and-go movements in which firm output remains low for many periods. That is, the economic system undergoes a recession which resembles a traffic jam.

Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2012/paper_978.pdf (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:red:sed012:978

Access Statistics for this paper

More papers in 2012 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().