MULTIPLE STEADY STATES AND ENDOGENOUS CYCLES IN A IS-LM MODEL WITH A NEGATIVE INTEREST ELASTICITY OF SAVINGS

Dynamic, intermediate-run, IS-LM models of Schinasi's type have so far largely relied on Kaldorian assumption (namely an S-shaped investment function) to determine economic conditions able to warrant endogenous fluctuations at business cycle frequencies. By using the instruments of the global analysis, this paper shows that, at least for the case of a pure money financing of the budget deficit, and provided that the interest rate sensitivity of savings can be made negative, an economy not satisfying the Kaldorian assumptions can also present oscillating behavior. A simulation study, based on the functional forms and parameter configurations in Makovínyiová, provides evidence that this can occur for plausible values.