Article

Common nonstationary components of asset prices

Journal of Economic Dynamics and Control (impact factor: 0.86). 01/1988; 12(2-3):347-364. pp.347-364
Source: RePEc

ABSTRACT This paper presents a stock-flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms' and households' financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves.

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Keywords

effective demand
 
financial fragility
 
financial sectors
 
Hopf bifurcation theorem
 
household sectors evolves endogenously
 
households' financial practices
 
labor market dynamics
 
limit cycles
 
paper presents
 
periodic economic crises
 
real
 
stable limit cycles