A Disequilibrium Growth Cycle Model with Differential Savings

Abstract:     
This paper extends Goodwin’s growth cycle model by assuming both differential savings propensities and disequilibrium in the goods market. It is shown that both modifications entail an increase in the dimensionality of the dynamical system of the model. By applying the existence part of the Hopf bifurcation theorem, the possibility of persistent and bounded cyclical paths for the resulting 4-dimensional dynamical system is then established. With the help of numerical simulation some evidence is finally given that the limit cycle emerging from the Hopf bifurcation is stable.

Number of Pages in PDF File: 19

Keywords: growth cycle, differential savings, limit cycle, disequilibrium models

JEL Classification: C61, E10, E32

working papers series