Revisiting the model of credit cycles with Good and Bad projects

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• 作者：Kiminori Matsuyama^a ; ^{k-matsuyama@northwestern.edu" class="auth_mail" title="E-mail the corresponding author} ; Iryna Sushko^b ; ^c ; ^{sushko@imath.kiev.ua" class="auth_mail" title="E-mail the corresponding author} ; Laura Gardini^d ; ^{laura.gardini@uniurb.it" class="auth_mail" title="E-mail the corresponding author}
• 关键词：C61 ; E32 ; E44
• 刊名：Journal of Economic Theory
• 出版年：2016
• 出版时间：May 2016
• 年：2016
• 卷：163
• 期：Complete
• 页码：525-556
• 全文大小：2549 K

文摘

We revisit the model of endogenous credit cycles by Matsuyama (2013, Sections 2–4). First, we show that the same dynamical system that generates the equilibrium trajectory is obtained under a much simpler setting. Such a streamlined presentation should help to highlight the mechanism through which financial frictions cause instability and recurrent fluctuations. Then, we discuss the nature of fluctuations in greater detail when the final goods production function is Cobb–Douglas. For example, the unique steady state possesses corridor stability (locally stable but globally unstable) for empirically relevant parameter values. This also means that, when a parameter change causes the steady state to lose its local stability, its effects are catastrophic and irreversible so that even a small, temporary change in the financial friction could have large, permanent effects on volatility. Other features of the dynamics include an immediate transition from the stable steady state to a stable asymmetric cycle   of period 16000314&_mathId=si1.gif&_user=111111111&_pii=S0022053116000314&_rdoc=1&_issn=00220531&md5=e1c0bc3fe05c5d403298b3ce44ce539a" title="Click to view the MathML source">n≥3$n\ge 3$, along which 16000314&_mathId=si2.gif&_user=111111111&_pii=S0022053116000314&_rdoc=1&_issn=00220531&md5=ed8946e2e4b7a0520de2ca1649d6827e" title="Click to view the MathML source">n−1≥2$n-1\ge 2$ consecutive periods of gradual expansion are followed by one period of sharp downturn, as well as to a robust chaotic attractor. These results demonstrate the power of the skew-tent map as a tool for analyzing a regime-switching dynamic economic model.