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STOCHASTIC AND DETERMINISTIC FLUCTUATIONS IN A NON-LINEAR MODEL WITH EQUITY RATIONING
Mauro Gallegati and Joseph E. Stiglitz
Giornale degli Economisti e Annali di Economia
Nuova Serie, Anno 51, No. 1/4 (Gennaio-Aprile 1992), pp. 97-108
Published by: EGEA SpA
Stable URL: http://www.jstor.org/stable/23247185
Page Count: 12
You can always find the topics here!Topics: Economic fluctuations, Financial investments, Keynesianism, Macroeconomics, Steady state economies, Limit cycles, Business economics, Time series, Investment income, Stochastic models
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In this paper, the authors model the movements in output as responses of the system to both deterministic and stochastic elements, without superimposing stochastic shocks to a basically deterministic world or, vice versa, limiting our approach to the steady state solution. Jointly analyzing the deterministic and the stochastic elements, we obtain aperiodic time series whose qualitative dynamics resembles actual time series. A deterministic path around a critical point arises since the propensity to invest can be above or below propensity to save and therefore the flows of internal finance and debt commitments will change, affecting investment demand. We model the shifts of the propensity to invest according to a white noise random process. Since a different limit cycle is associated to each level of this propensity, a continuum of cycles can be detected. Therefore, the dynamics of the time series will be determined by the joint influence of the deterministic cycle and the random process which generates "jumps" from a cycle to another.
Giornale degli Economisti e Annali di Economia © 1992 EGEA SpA