Skip to main content
SpringerLink
Log in

Homoclinic and Heteroclinic Bifurcations in an Overlapping Generations Model with Credit Market Imperfection

  • Published:
Computational Economics Aims and scope Submit manuscript

Abstract

We analyze a nonlinear OLG model with credit market imperfection and endogenous labor supply. When the investors’ protection is perfect, the model reduces to the standard one sector growth model proposed by Reichlin (JET 40:89–102, 1986), while the model reduces to the one studied by Matsuyama (Econometrica 72:853–884, 2004) when the agents’ labor supply is exogenous. Our goal is to highlight that the local analysis of the perfect foresight equilibrium may lead to misleading conclusions because the local analysis neglects the occurrence of different global bifurcation scenarios. In particular, the existence of a heteroclinic connection or the occurrence of a homoclinic bifurcation may be associated with global indeterminacy even when all steady states are locally determinate.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Agliari, A., & Vachadze, G. (2010). Endogenous Labor Supply, Borrowing Constraint, and Credit Cycles. Working Paper no.59, DISES Universitàé1 Cattolica del Sacro Cuore, Piacenza (Italy). Avaliable at http://ideas.repec.org/p/ctc/serie2/dises1059.html.

  • Bai-Lin H. (1989) Elementary Symbolic Dynamics and Chaos in Dissipative Systems. World Scientific, Singapore

    Google Scholar 

  • Benhabib J., Eusepi S. (2005) The design of monetary and Fiscal policy: A global perspective. Journal of Economic Theory 123: 40–73

    Article  Google Scholar 

  • Benhabib J., Schmitt-Grohé S., Uribe M. (2001) The Perils of Taylor rules. Journal of Economic Theory 96: 40–69

    Article  Google Scholar 

  • Cazzavillan G., Lloyd-Braga T., Pintus P. A. (1998) Multiple steady states and endogenous fluctuations with increasing returns to scale in production. Journal of Economic Theory 80: 60–107

    Article  Google Scholar 

  • Cazzavillan G. (2001) Indeterminacy and endogenous fluctuations with arbitrarily small externalities. Journal of Economic Theory 101: 133–157

    Article  Google Scholar 

  • Cazzavillan G., Pintus P. (2004) Robustness of multiple equilibria in OLG economies. Review of Economic Dynamics 7: 456–475

    Article  Google Scholar 

  • Chiappori P. A., Guesnerie R. (1991) Sunspot equilibria in sequential markets model. In: Hildenbrand W., Sonnenschein H. (eds) Handbook of Mathematical Economics . North-Holland, Amsterdam, pp 1683–1762

    Google Scholar 

  • Christiano Lawrence J., Harrison Sharon G. (1999) Chaos, sunspots and automatic stabilizers. Journal of Monetary Economics 44: 3–31

    Article  Google Scholar 

  • Gomis-Porqueras P., Gomis-Porqueras P. (1998) Global bifurcations, credit rationing and recurrent hyperinflations. Journal of Economic Dynamics and Control 31: 473–491

    Article  Google Scholar 

  • Grandmont J.-M., Pintus P., de Vilder R. (1998) Capital-labor substitution and competitive nonlinear endogenous business cycles. Journal of Economic Theory 80: 14–59

    Article  Google Scholar 

  • Guckenheimer J., Holmes P. (1983) Nonlinear Oscillations, Dynamical Systems, and Bifurcations of Vector Fields. Springer, New York

    Google Scholar 

  • Kuznetsov Y. A. (2003) Elements of Applied Bifurcation Theory. Springer-Verlag, New York

    Google Scholar 

  • Matsuyama K. (2004) Financial market globalization, symmetry-breaking and endogenous inequality of nations. Econometrica 72: 853–884

    Article  Google Scholar 

  • Mira C. (1987) Chaotic Dynamics From the One-Dimensional Endomorphism to the Two-Dimensional Diffeomorphism. World Scientific, Singapore

    Google Scholar 

  • Nourry C., Venditti A. (2006) Overlapping generations model with endogenous labor supply: general formulation. Journal of Optimization Theory and Applications 128: 355–377

    Article  Google Scholar 

  • Pintus P., Sands D., de Vilder R. (2000) On the transition from local regular to global irregular fluctuations. Journal of Economic Dynamics and Control 24: 247–272

    Article  Google Scholar 

  • Reichlin P. (1986) Equilibrium cycles in an overlapping generations economy with production. Journal of Economic Theory 40: 89–102

    Article  Google Scholar 

  • Saidi, A. (2008). Balanced-Budget Rule, Distortionary Taxes and Aggregate Instability: A Comment. EconomiX Workings Papers, 2008-44.

  • Wiggins S. (1988) Global Bifurcations and Chaos, Analytical Methods. Springer-Verlag, New York

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economic and Social Sciences, Catholic University, 29100, Piacenza, Italy

    Anna Agliari

  2. Department of Economics, College of Staten Island and the Graduate Center of the City University of New York, Staten Island, NY, 10314, USA

    George Vachadze

Authors
  1. Anna Agliari
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. George Vachadze
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Anna Agliari.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Agliari, A., Vachadze, G. Homoclinic and Heteroclinic Bifurcations in an Overlapping Generations Model with Credit Market Imperfection. Comput Econ 38, 241–260 (2011). https://doi.org/10.1007/s10614-011-9282-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10614-011-9282-y

Keywords

JEL Classification

Search

Navigation