Discrete Dynamics in Nature and Society
Volume 5 (2000), Issue 4, Pages 281-295
Stability, instability and complex behavior in macrodynamic models with policy lag
1Faculty of Economics, Chuo University 742-1 Higashinakano, Hachioji, Tokyo 192-0393, Japan
2Faculty of Economics, Nagoya Gakuin University 1350 Kamishinanocho, Seto Aichi 480-1298, Japan
Received 6 June 2000
Copyright © 2000 Toichiro Asada and Hiroyuki Yoshida. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
We construct simple macrodynamic models with policy lag by means of mixed difference and differential equations, and study how lags in policy response affect the macroeconomic (in)stability. Local dynamics of the prototype model are studied analytically, and the global dynamics of the prototype and the extended models are studied by means of numerical simulations. We show that the government can stabilize the intrinsically unstable economy if the policy lag is sufficiently short, but the system becomes locally unstable when the policy lag is too long. We also show the existence of cycles and complex behavior in some range of the policy lag.