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Kaldor–Kalecki New Model on Business Cycles

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Nonlinearities in Economics

Part of the book series: Dynamic Modeling and Econometrics in Economics and Finance ((DMEF,volume 29))

Abstract

R.G. Goodwin mentioned that “economists will be led, as natural scientists have been led, to seek in nonlinearities an explanation of the maintenance of oscillation” (Goodwin, Econometrica 19(1), 1951); following this reasoning, we studied business cycles as if they were generated by nonlinear differential equations which prove that the proposed model exhibits chaotic behavior.

The main goal of this chapter is to study chaotic behaviour within Kaldor’s framework described in Chap. 12. In the following, we suggest an alternative to the usual models in the literature. Our approach is consistent with chaotic dynamics and adheres to the Kaldorian specifications. This is obtained by declaring that investment and saving functions, I and S respectively are: nonlinear, regular, increasing (or at least not decreasing) whilst capital and income are growing. This is achieved by a new functional specification of the investment and consumption as variants of the hyperbolic tangent rather than the usual arctangent available in literature. Apart from a full set of parameters useful for calibrations, an additional feature of this model is the ability to embed randomness. The latter opens the way to a mixture of stochastic and deterministic chaos.

Part of this chapter has appeared in [27, 28].

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Notes

  1. 1.

    For further considerations regarding this topic see Sect. A.2.

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Authors and Affiliations

  1. University of Bari, Department of Economics and Finance, Bari, Italy

    Giuseppe Orlando

  2. University of Camerino, School of Sciences and Technology, Camerino, Italy

    Giuseppe Orlando

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  1. Giuseppe Orlando
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Correspondence to Giuseppe Orlando .

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Editors and Affiliations

  1. Department of Economics & Finance, University of Bari Aldo Moro, Bari, Italy

    Giuseppe Orlando

  2. Technical University of Madrid Center for Biomedical Technology, Campus Montegancedo, Pozuelo de Alarcón, Madrid, Spain

    Alexander N. Pisarchik

  3. Institute of Neuroinformatics, Swiss Federal Institute of Technology, Zürich, Switzerland

    Ruedi Stoop

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Orlando, G. (2021). Kaldor–Kalecki New Model on Business Cycles. In: Orlando, G., Pisarchik, A.N., Stoop, R. (eds) Nonlinearities in Economics. Dynamic Modeling and Econometrics in Economics and Finance, vol 29. Springer, Cham. https://doi.org/10.1007/978-3-030-70982-2_16

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