Analysis of the Effects of Time Lags and Nonlinearities in Macroeconomic Models Incorporating the Government Budget Restraint

Abstract

In the last chapter we demonstrated the two basic tools for the analysis of limit cycle solutions to nonlinear differential equations, viz. the method of averaging and the method of relaxation oscillations, on some of the traditional endogenous business cycle theories. We saw there that this approach allows us to view such theories within a unified mathematical framework, and we were thereby able to make a number of simple extensions to these models. We were also able to gauge the effects of traditional countercyclical policies on the amplitude of the cycle.