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Dimensions of Economic Theory and PolicyEssays for Anjan Mukherji$
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Krishnendu Ghosh Dastidar, Hiranya Mukhopadhyay, and Uday Bhanu Sinha

Print publication date: 2011

Print ISBN-13: 9780198073970

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780198073970.001.0001

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Observability of Chaotic Economic Dynamics in the Matsuyama Model

Observability of Chaotic Economic Dynamics in the Matsuyama Model

(p.83) 6 Observability of Chaotic Economic Dynamics in the Matsuyama Model
Dimensions of Economic Theory and Policy

Makoto Yano

Kenji Sato

Yuichi Furukawa

Oxford University Press

The interaction between innovation and capital accumulation may give rise to a cyclical equilibrium path in an endogenous growth model. This presents a new mechanism through which two productive sectors interact with one another to create nonlinear equilibrium dynamics. However, no study has fully examined the extent of nonlinearity. This chapter focuses on the observability of chaotic economic dynamics in the Matsuyama model of endogenous growth with innovation and capital accumulation. It shows that the Matsuyama system can be an ergodic chaos for a wide range of parameter values; in an ergodic chaos chaotic behaviour is observable for almost every initial state but not in a topological chaos. This result extends the earlier work of Anjan Mukherji and Tapan Mitra, who used bifurcation diagrams to demonstrate the possibility of a topological chaos as well as the observability of a chaos.

Keywords:   observability, innovation, capital accumulation, endogenous growth model, ergodic chaos, nonlinear equilibrium dynamics, economic dynamics, Matsuyama model, topological chaos, Anjan Mukherji

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