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Dynamic complexity in a Keynesian growth-cycle model involving Harrod's instability

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Abstract

This paper develops a Keynesian macrodynamic model, where some recent reinterpretations of Harrod's dynamics are embodied. Its main purpose is to prove that Harrod's “instability principle” may give rise to a chaotic motion (specifically a Šil'nikov scenario) around two equilibrium points: a steady-state unstable equilibrium, whose value depends on parameters defining the technical-progress dynamics, and a stationary state of zero growth. Furthermore, since it allows for a variable growth rate of labor productivity and assigns a key role to expectations, this model comes closer to modern theories of economic growth and endogenous business cycle.

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Authors and Affiliations

  1. Dipartimento di Scienze Economiche, Università degli Studi di Bari, Via C. Rosalba, 53, I-70124, Bari, Italy

    Mario C. Sportelli

  2. Department of Economics, University of Glasgow, A. Smith Building, G12 8RT, Glasgow, UK

    Mario C. Sportelli

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Sportelli, M.C. Dynamic complexity in a Keynesian growth-cycle model involving Harrod's instability. Zeitschr. f. Nationalökonomie 71, 167–198 (2000). https://doi.org/10.1007/BF01227450

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