The Phillips curve as a long-run phenomenon in a macroeconomic model with complex dynamics
✍ Scribed by Luca Colombo; Gerd Weinrich
- Publisher
- Elsevier Science
- Year
- 2003
- Tongue
- English
- Weight
- 704 KB
- Volume
- 28
- Category
- Article
- ISSN
- 0165-1889
No coin nor oath required. For personal study only.
✦ Synopsis
In this paper we derive a Phillips curve as the image of a chaotic attractor of the state variables of a non-linear dynamical system describing the evolution of an economy. This has two important consequences: the Phillips curve in our model is a true long-run phenomenon, but to exploit the apparent unemployment-in ation trade-o may require unrealistically complex policy measures. The model is based on an overlapping-generations non-tâtonnement approach involving temporary equilibria with stochastic rationing in each period and price adjustment between successive periods. In this way we are able to obtain complex sequences of consistent allocations allowing for recurrent unemployment and in ation.