Staff Report 55

Back to Publication

Chaotic Dynamics and Bifurcation in a Macro Model

Michael J. Stutzer - Professor of Finance, University of Iowa

Revised July 1, 1980

Abstract
The qualitative dynamics of a discrete time version of a deterministic, continuous time, nonlinear macro model formulated by Haavelmo are fully characterized. Recently developed methods of symbolic dynamics and ergodic theory are shown to provide a simple, effective means of analyzing the behavior of the resulting one-parameter family of first-order, deterministic, nonlinear difference equations. A complex periodic and random “aperiodic” orbit structure dependent on a key structural parameter is present, which contrasts with the total absence of such complexity in Haavelmo’s continuous time version. Several implications for dynamic economic modelling are discussed.


Download Paper (PDF)