Chaotic Business Cycles within a Kaldor-Kalecki Framework

This chapter, after providing some background on business cycles, Kaldor’s original model and related literature, presents an original specification Orlando (Math Comput Simul 125:83–98, 2016) which adds to the cyclical behaviour some peculiar characteristics such as an asymmetric investment and consumption function, lagged investments and integration of economic shocks. A further section proves the chaotic behaviour of the model and adds some insights derived from recurrence quantification analysis. The final part draws some concluding remarks and makes some suggestions for future research. This work investigates chaotic behaviours within a Kaldor-Kalecki framework. This can be achieved by an original specification of the functions describing the investments and consumption as variants of the hyperbolic tangent function rather than the usual arctangent. Therefore fluctuations of economic systems (i.e. business cycles) can be explained by the shape of the investment and saving functions which, in turn, are determined by the behaviour of economic agents. In addition it is explained how the model can accommodate those cumulative effects mentioned by Kaldor which may have the effect of translating the saving and investment functions. This causes the so-called shocks which may be disruptive to the economy or that may have the effect of helping the system to recover from a crisis.