Period Models, Continuous Time and Applied Macrodynamics

Part of the Dynamic Modeling and Econometrics in Economics and Finance book series (DMEF, volume 10)

In this chapter, and we reconsider the issue of the (non-)equivalence of period and continuous time analysis. We stress here that period models—the now dominant model type in the macrodynamic literature—assume a single (uniformly applied) lag length for all markets, which therefore act in a completely synchronized manner. In view of this, we start in Sect. 1.2 from the methodological precept that period and continuous time representations of the same macrostructure should give rise to the same qualitative outcome, i.e., that the qualitative results of period analysis should not depend on the length of the period, see Foley (1975) for an earlier statement of this precept, as well as Medio (1991) and Sims (1998) for related observations. A simple example where this is fulfilled is given by the conventional Solow growth model, considered in Sect. 1.3, while all chaotic period dynamics of dimension less than 3 are in conflict with this precept, see however Medio (1991a) for routes to chaos in such an environment.


Continuous Time Chaotic Dynamic Real Wage Chaotic Attractor Period Length 
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