Multiple Equilibria and Endogenous Cycles in a Non-Linear Harrodian Growth Model

摘要

The standard result of Harrod's growth model is that, because investors react more strongly than savers to a change in income, the long run equilibrium of the economy is unstable. We re-interpret the Harrodian instability puzzle as a local instability problem and integrate his model with a nonlinear investment function. Multiple equilibria and different types of complex behaviour emerge. Moreover, even in the presence of locally unstable equilibria, for a large set of initial conditions the time path of the economy is not diverging, providing a solution to the instability puzzle.