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Economic models and the relevance of “chaotic regions”:An application to Goodwin's growth cycle model

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Abstract

In this paper, we argue that Pohjola's one‐dimensional, discrete‐time version of Goodwin'sgrowth cycle model is based on assumptions that conflict with the “symbiotic‐conflictual”spirit of the model. It is shown that when the assumption about the dynamical real wage ismodified, in contrast with Pohjola's opinion, the likelihood of chaotic solutions does notincrease. In particular, when a discrete‐time Phillips curve is considered, the model becomestwo‐dimensional, but admits chaotic solutions only for parameter values which are not withineconomically reasonable values.

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  1. S. Sordi
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Sordi, S. Economic models and the relevance of “chaotic regions”:An application to Goodwin's growth cycle model. Annals of Operations Research 89, 3–19 (1999). https://doi.org/10.1023/A:1018987909832

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