This paper contributes to the new keynesian literature by showing that stable endogenous cycles can emerge as equilibrium solutions of the traditional IS-LM model. The application of the original Bogdanov-Takens theorem allows us to determine the regions of the parametric space where the model exhibits a global indeterminate solution, and a low-growth trapping region, characterized by a continuum of equilibrium trajectories in the proximity of a homoclinic bifurcation.
Homoclinic Bifurcation and Endogenous Cycles in the Dynamic IS-LM Model
BELLA, GIOVANNI
2015-01-01
Abstract
This paper contributes to the new keynesian literature by showing that stable endogenous cycles can emerge as equilibrium solutions of the traditional IS-LM model. The application of the original Bogdanov-Takens theorem allows us to determine the regions of the parametric space where the model exhibits a global indeterminate solution, and a low-growth trapping region, characterized by a continuum of equilibrium trajectories in the proximity of a homoclinic bifurcation.
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