Real and financial market interactions in a multiplier-accelerator model: Nonlinear dynamics, multistability and stylized facts

Nicolo' Pecora, Fausto Cavalli, A. Naimzada

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

In the present paper, we investigate the dynamics of a model in which the real part of the economy, described within a multiplier-accelerator framework, interacts with a financial market with heterogeneous speculators, in order to study the channels through which the two sectors influence each other. Employing analytical and numerical tools, we investigate stability conditions as well as bifurcations and possible periodic, quasi-periodic, and chaotic dynamics, enlightening how the degree of market interaction, together with the accelerator parameter and the intervention of the fiscal authority, may affect the business cycle and the course of the financial market. In particular, we show that even if the steady state is locally stable, multistability phenomena can occur, with several and complex dynamic structures coexisting with the steady state. Finally, simulations reveal that the proposed model is able to explain several statistical properties and stylized facts observed in real financial markets, including persistent high volatility, fat-tailed return distributions, volatility clustering, and positive autocorrelation of absolute returns. Published by AIP Publishing.
Original languageEnglish
Pages (from-to)N/A-N/A
JournalChaos
Volume27
DOIs
Publication statusPublished - 2017

Keywords

  • Market interactions
  • multistability
  • stability and bifurcations

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