The Phillips Curve as an Attractor in a Dynamic Macroeconomic Model

In this paper the Phillips curve is derived as the image of a chaotic attractor of the state variables of a non-linear dynamical system describing the evolution of an economy. This has two important consequences: the Phillips curve in the model is a true long-run phenomenon and it cannot be used for policy purposes. The model is based on an overlapping-generations non-tatonnement approach involving temporary equilibria with stochastic rationing in each period and price adjustment between successive periods. In this way it is possible to obtain complex sequences of consistent allocations allowing for recurrent unemployment and inflation.