Acta Oeconomica Pragensia 2007, 15(4):79-87 | DOI: 10.18267/j.aop.77
Production, Capital Stock, and Price Level Dynamics in the Light of Kaldorian Model
- Prof. RNDr. Ing. Jan Kodera, CSc. - professor; Department of Monetary Policy and Theory, Faculty of Finance and Accounting, University of Economics, Prague, nám. W. Churchilla 4, 130 67 Prague 3, Czech Republic, kodera@vse.cz
- Doc. Ing. Miloslav Voąvrda, CSc. - head of Department of Econometrics, Institute of Information Theory and Automation, the Academy of Sciences of the Czech Republic, Pod Vodárenskou věľí 4, 182 08 Prague 8, Czech Republic, vosvrda@utia.cas.cz
The purpose of this paper is to study a price level dynamics in a simple fourequation model. A basis of this model is developed from dynamical Kaldorian model which could be noticed very frequently in works of non-linear economic dynamics. Our approach is traditional. The difference is observed in a choice of an investment function. The investment function depending on the difference of logarithm of production and logarithm of capital (logarithm of the productivity of capital) is in a form of the logistic function. These two equations create relatively closed sub-model generating both production and capital stock trajectories. Two other equations describe the price level dynamics as a consequence of money market disequilibrium and continuously adaptive expectation of inflation. Our investigation is firstly aimed to core model dynamics, i.e., a dynamics of the production and capital stock. Secondly is to analyze dynamics of the model as a whole, i.e., to the first part is superadded the price dynamics and expected inflation dynamics depending on both an adaptation parameter of the commodity market and a parameter of the expectation. Thirdly, we compute Lyapunov exponents for simple model of closed economy showing its chaotic behavior.
Keywords: investment ratio, propensity to save, expected inflation, nonlinear system, price dynamics
JEL classification: E44
Published: August 1, 2007 Show citation
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