Chaos in economic models with exogenous shocks

Date

2014-10-01

Author

Akhmet, Marat
Fen, Mehmet Onur

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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.

Subject Keywords

Economics and Econometrics, Organizational Behavior and Human Resource Management

URI

https://hdl.handle.net/11511/39199

Journal

JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION

DOI

https://doi.org/10.1016/j.jebo.2014.06.008

Collections

Department of Mathematics, Article

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Citation Formats

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