6533b82afe1ef96bd128b722

RESEARCH PRODUCT

Noise-induced transitions in a stochastic Goodwin-type business cycle model

Tatyana RyazanovaJochen JungeilgesJochen Jungeilges

subject

Economics and EconometricsVan der Pol oscillatorProcess (engineering)Computer science010102 general mathematics05 social sciencesContext (language use)Type (model theory)Parameter space01 natural sciencesNoise (electronics)0502 economics and businessAttractorBusiness cycleStatistical physics0101 mathematicsMathematical economics050205 econometrics

description

Abstract We motivate and specify a stochastic Goodwin-type business cycle model. Our analysis focusses on a subset of the parameter space where several attractors coexist. Applying a semi-numerical approach based on the stochastic sensitivity function and confidence domains due to Milstein and Ryashko (1995) , we study random transitions between stable attractors in the context of the Goodwin-type economy embedded in an uncertain environment. Relying on a mix of analytical considerations and simulations we demonstrate that under weak noise levels regime switching is a prominent feature in the presence of low saving rates. Moreover, we explain how increased uncertainty can induce an essentially unpredictable income process out of an apparently stable high-income level situation. All dynamic phenomena are explained in terms of key concepts constituting the stochastic sensitivity function method.

yearjournalcountryeditionlanguage
2017-03-01Structural Change and Economic Dynamics
https://doi.org/10.1016/j.strueco.2017.01.003