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Endogenous desired debt in a Minskyan business model

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  • Cerboni Baiardi, Lorenzo
  • Naimzada, Ahmad K.
  • Panchuk, Anastasiia

Abstract

We consider a Minskyan type model of a closed economy with autonomous public expenditure formulated in a discrete time framework, where an endogenous debt adjustment process is considered and where income variations account for real world physical and social constraints. The model is characterized by a unique nontrivial fixed point matching the economic equilibrium. We study its stability properties in terms of the constant factor that fixes the firms’ desired debt level at a certain proportion of the current income. The stability loss of the fixed point is associated with either a subcritical flip or a supercritical Neimark–Sacker bifurcation. The latter implies occurrence of self-sustained oscillations interpreted as business cycles. We present three possible dynamic scenarios right after the Neimark–Sacker bifurcation: in a generic case and in two resonant cases. We also describe modifications of the attractor when propensity of firms to get into debt grows. In addition, we highlight that the increase of instabilities and complexities of dynamic outcomes is paired with the rise of the so called financial fragility indicator, which is a measure of fragility of the financial structure of the economy.

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  • Cerboni Baiardi, Lorenzo & Naimzada, Ahmad K. & Panchuk, Anastasiia, 2020. "Endogenous desired debt in a Minskyan business model," Chaos, Solitons & Fractals, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:chsofr:v:131:y:2020:i:c:s0960077919304163
    DOI: 10.1016/j.chaos.2019.109470
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    References listed on IDEAS

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    1. Roberto Veneziani & Luca Zamparelli & Maria Nikolaidi & Engelbert Stockhammer, 2017. "Minsky Models: A Structured Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1304-1331, December.
    2. Gardini, Laura & Tramontana, Fabio, 2011. "Border collision bifurcation curves and their classification in a family of 1D discontinuous maps," Chaos, Solitons & Fractals, Elsevier, vol. 44(4), pages 248-259.
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    Cited by:

    1. Mai, Fengxia & Zhang, Jianxiong & Sun, Xiaojie, 2021. "Dynamic analysis of pricing model in a book supply chain," International Journal of Production Economics, Elsevier, vol. 233(C).
    2. Andrea Bacchiocchi & Alessandro Bellocchi & Gian Italo Bischi & Giuseppe Travaglini, 2024. "A non-linear model of public debt with bonds and money finance," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 457-498, July.

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