Abstract
In this paper, we shall discuss some applications of chaos theory to the study of continuous-time economic dynamic models, i.e., models represented by systems of ordinary differential equations. Two such applications will be considered. The first, discussed in Part I of the paper, is a continuous-time generalization of a class of non-linear, one-dimensional maps which encompasses the majority of existing economic models of chaotic dynamics. The second, discussed in Part II, is a model of inventory cycles of Keynesian inspiration, represented by a system of three differential equations, including a single ‘one-humped’ non-linearity. Two points will be given particular emphasis, namely: in Part I, the relationship between discrete- and continuous-time representation of economic phenomena; in both Parts I and II, the combined role of lags and non-linearity in generating chaotic output.
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