Abstract
<p>This paper generalizes the dynamic growth model with interactions between fashion, economic growth and income and wealth distribution recently built by Zhang (2016). The modelling of fashion and preference change is inspirited by the economic model of fashion recently published by Giovinazzo and Naimzada (2015). This study introduces fashion into neoclassical growth theory. The original model is based on some ideas in the literature of economics of fashion. This study generalizes Zhang’s model by making all the time-independent parameters as time-dependent parameters. We simulate the motion of the economic system. We carry out comparative dynamic analysis with regard to periodic perturbations in some parameters. We show how exogenous period changes in these parameters lead to business cycles. </p>
Highlights
It is well known that business cycles theories use different determinants to identify economic oscillations in different economic systems
The model deals with economic growth of heterogeneous households with economic structure
The original model was based on some ideas in the literature of economics of fashion
Summary
It is well known that business cycles theories use different determinants to identify economic oscillations in different economic systems. There are a few economic models which exhibit periodic changes due to exogenous periodic changes with fashions. Hemphill and Suk (2009: 1148) describe dynamics of fashion as follows: “People flock to ideas, styles, methods, and practices that seem new and exciting, and eventually the intensity of that collective fascination subsides, when the newer and more exciting emerge on the scene. The purpose of this study is to make a unique contribution to business cycles theories by demonstrating business cycles in an economic growth model with fashion. We introduce exogenous changes into a model with interactions between fashion, economic growth and income and wealth distribution. This study generalizes Zhang’s model by allowing all the time-independent parameters to be time dependent. We specially show how business cycles in the fashion industry can be generated by different exogenous periodic shocks.
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