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Publication Detailed Description
Imperfect demand expectations and endogenous business cycles
Journal Title
Zagreb International Review of Economics and Business
Year (definitive publication)
2008
Language
English
Country
Croatia
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Abstract
Optimal growth models aim at explaining long run trends of growth under the strong
assumption of full efficiency in the allocation of resources. As a result, the steady state time
paths of the main economic aggregates reflect constant, exogenous or endogenous, growth.
To introduce business cycles in this optimality structure one has to consider some source of
inefficiency. By assuming that firms adopt a simple non optimal rule to predict future
demand, we let investment decisions to depart from the ones that would guarantee the total
efficiency outcome. The new investment hypothesis is considered under three growth setups
(the simple one equation Solow model of capital accumulation, the Ramsey model with
consumption utility maximization, and a two sector endogenous growth scenario); for each
one of the models, we find that endogenous business cycles of various orders (regular and
irregular) are observable.
Acknowledgements
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Keywords
Endogenous business cycles,Nonlinear dynamics,Growth models,Bifurcation analysis
Funding Records
Funding Reference | Funding Entity |
---|---|
POCTI/ECO/48628/2002 | Fundação para a Ciência e a Tecnologia |