Kaldorian Assumptions and Endogenous Fluctuations in the Dynamic Fixed-Price IS-LM Model

With the aim of better understanding the conditions which determine endogenous fluctuations at business cycle frequencies, recent literature has revived interest in the Schinasi’s variant of the dynamic, intermediate-run, IS-LM model (Schinasi 1981, 1982). Results, however, remain confined to Kaldoriantype economies, namely to those economies which present a greater-than-unity marginal propensity to spend out of income. This paper contributes to the debate by showing that, in the case of a negative interest rate sensitivity of savings, stable endogenous cycles can actually emerge as equilibrium solutions of the model also in the case of non Kaldorian-type economies. To this end, we combine the instruments of the global analysis, specifically the homoclinic bifurcation Theorem of Kopell and Howard (1975), with numerical methods.