Dynamics of an Extended Kaldor Model with Rational Expectation of Capital Efficiency and Adaptive Expectation of Inflation

Kodera and J.

No 281, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: The paper deals with non-linear dynamics of an extended Kaldor model including not only production and capital stock dynamics but also the interest rate and price dynamics with an adaptive expectation of inflation. Presented structure of the model is described by the system of the five differential equations. The first one shows the production dynamics of the extended model. The second one describes interest rate as equalizing factor of the monetary market. The third one explains capital stock movement, the last two equations show price dynamics and inflation. The above system is analysed by usual way.In the first place we find an equilibrium of the model, check its stability and describe its dynamics especially in the case of the unstable equilibrium where the limit cycle or chaos could occur. For the description of dynamic behaviour of this model we will use traditional means as phase portraits. For the solving of the more complex problems such as changes of the model parameters that cause the changes in dynamic behaviour of the model we will use computer animations which are very useful means for a demonstration of the dependence of the trajectories of phase variables on changes of the model parameters

Keywords: non-linear dynamics; capital stock dynamics; price dynamics with an adaptive expectation of inflation; unstable equilibrium; limit cycle; chaos (search for similar items in EconPapers)
JEL-codes: E12 E31 E42 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-cmp, nep-mac, nep-mon and nep-pke
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