Chaos in economic models with exogenous shocks

2014-10-01
Akhmet, Marat
Akhmetova, Zhanar
Fen, Mehmet Onur
We investigate the generation of chaos in economic models through exogenous shocks. The perturbation is formulated as a pulse function where either values or instants of discontinuity are chaotically behaved. We provide a rigorous proof of the existence of chaos in the perturbed model. The analytical results are applied to Kaldor-Kalecki-type models of the aggregate economy subject to export and rainfall shocks, respectively. Simulations are used to demonstrate the emergence and the control of chaos. Our results shed light on a novel source of chaos in economic models and have important implications for policy-making.

Citation Formats
M. Akhmet, Z. Akhmetova, and M. O. Fen, “Chaos in economic models with exogenous shocks,” JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION, vol. 106, pp. 95–108, 2014, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/39199.