Homoclinic and heteroclinic bifurcations in an overlapping generations model with credit market imperfection. (English) Zbl 1282.91205
Summary: We analyze a nonlinear OLG model with credit market imperfection and endogenous labor supply. When the investors’ protection is perfect, the model reduces to the standard one sector growth model proposed by P. Reichlin [J. Econ. Theory 40; 89–102 (1986; Zbl 0658.90023)], while the model reduces to the one studied by K. Matsuyama [Econometrica 72, No. 3, 853–884 (2004; Zbl 1137.91580)] when the agents’ labor supply is exogenous. Our goal is to highlight that the local analysis of the perfect foresight equilibrium may lead to misleading conclusions because the local analysis neglects the occurrence of different global bifurcation scenarios. In particular, the existence of a heteroclinic connection or the occurrence of a homoclinic bifurcation may be associated with global indeterminacy even when all steady states are locally determinate.
MSC:
| 91B62 | Economic growth models |
| 37N40 | Dynamical systems in optimization and economics |
| 91B55 | Economic dynamics |
Keywords:
credit market imperfection; elastic labor supply; endogenous fluctuations; homoclinic bifurcations; heteroclinic bifurcationsReferences:
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