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Stabilization Policy as Bifurcation Selection: Would Keynesian Policy Work if the World Really were Keynesian?

Author

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  • William A. Barnett

    (Washington University in St. Louis)

  • Yijun He

    (Washington University in St. Louis)

  • .
Abstract
This paper is a follow on to our earlier papers exploring the dynamic properties of the UK continuous time macroeconometric model. This paper is focussed on policy implications. We take the position that the term "stabilization policy" implies that the economy would be unstable without policy, and hence stabilization policy only can be understood as bifurcation to stability, conditionally upon the assumption that the economy would be unstable without that policy bifurcation. We apply the methodology of mathematical bifurcation to investigate this point of view. We conclude that bifurcation selection to stability is more complicated than commonly believed to be the case in much Keynesian economics. However, this conclusion is consistent with common views in the mathematical literature on bifurcation of high dimensional systems.

Suggested Citation

  • William A. Barnett & Yijun He & ., 1999. "Stabilization Policy as Bifurcation Selection: Would Keynesian Policy Work if the World Really were Keynesian?," Macroeconomics 9906008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9906008
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    References listed on IDEAS

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    1. Nieuwenhuis, Herman J. & Schoonbeek, Lambert, 1997. "Stability and the structure of continuous-time economic models," Economic Modelling, Elsevier, vol. 14(3), pages 311-340, July.
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    Cited by:

    1. Barnett William A & Dalkir Mehmet S, 2007. "Gains from Synchronization," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(1), pages 1-30, March.
    2. Barnett, William A. & Duzhak, Evgeniya Aleksandrovna, 2008. "Non-robust dynamic inferences from macroeconometric models: Bifurcation stratification of confidence regions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3817-3825.
    3. Peter N. Ireland, 2007. "Commentary on \\"Monetary policy as equilibrium selection\\"," Review, Federal Reserve Bank of St. Louis, vol. 89(Jul), pages 343-348.
    4. He, Yijun & Barnett, William A., 2006. "Singularity bifurcations," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 5-22, March.
    5. William Barnett & Barry E. Jones & Milka Kirova & Travis D. Nesmith & Meenakshi Pasupathy1, 2004. "The Nonlinear Skeletons in the Closet," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200403, University of Kansas, Department of Economics, revised May 2004.
    6. William A. Barnett & Yijun He, 2002. "Bifurcations in Macroeconomic Models," Macroeconomics 0210006, University Library of Munich, Germany.

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    More about this item

    Keywords

    bifurcation stabilization chaos nonlinearity;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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