Delay Dynamics in a Classical IS‐LM Model with Tax Collections

31 Pages Posted: 4 Oct 2016

See all articles by Akio Matsumoto

Akio Matsumoto

Chuo University

Ferenc Szidarovszky

University of Arizona - Department of Systems & Industrial Engineering (SIE)

Date Written: November 2016

Abstract

An IS‐LM model is developed for the dynamics of income, interest rate and money stock with delay in tax revenue. The main aim is to show that the delay matters in macro dynamics. Two different delays, fixed time delays and continuously distributed time delays, are considered explicitly and described by delay‐differential equations and integro‐differential equations, respectively. Conditions for the local stability of the two models are derived and compared. The destabilizing effects caused by the delay are numerically examined. Appearance of wide spectrum of dynamics ranging from simple cyclic oscillations to complex dynamics is described through Hopf bifurctions.

Suggested Citation

Matsumoto, Akio and Szidarovszky, Ferenc, Delay Dynamics in a Classical IS‐LM Model with Tax Collections (November 2016). Metroeconomica, Vol. 67, Issue 4, pp. 667-697, 2016, Available at SSRN: https://ssrn.com/abstract=2847410 or http://dx.doi.org/10.1111/meca.12128

Akio Matsumoto (Contact Author)

Chuo University ( email )

2nd floor Blg 4 Tampa Campus
742-1 Higashinakano, Hachioji
Tokyo 192-03
Japan

Ferenc Szidarovszky

University of Arizona - Department of Systems & Industrial Engineering (SIE) ( email )

Tucson, AZ
United States
520-621-6557 (Phone)

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