Endogenous Business Cycle Dynamics within Metzlers Inventory Model: Adding an Inventory Floor.
Metzlers inventory model may produce dampened fluctuations in economic activity, thus contributing to our understanding of business cycle dynamics. For some parameter combinations, however, the model generates oscillations with increasing amplitude, implying that the inventory stock of firms eventually turns negative. Taking this observation into account, we reformulate Metzlers model by simply putting a floor to the inventory level. Within the new piecewise linear model, endogenous business cycle dynamics may now be triggered via a center bifurcation, i.e. for certain parameter combinations production changes are (quasi-)periodic.
Sushko
Irina
I
University of Bamberg, Department of Economics, Feldkirchenstrasse 21, Bamberg, D-96045, Germany.
Wegener
Michael
M
Westerhoff
Frank
F
Zaklan
Georg
G