Stable, Unstable, and Persistent Cyclical Behaviour in a Keynes-Wicksell Monetary Growth Model.

This paper reconsiders the version of a Keynes-Wicksell model that was introduced in a textbook by T. Sargent (Macroeconomics). After giving a full and mathematically consistent formulation, local stability and instability of the steady state is characterized by different speeds of adjustment in the adaptive expectations of inflation. Subsequently, the Hopf bifurcation theorem is applied to prove existence of periodic orbits. The results are illustrated by means of computer simulations. It is shortly indicated that the model may contribute to a theory of sustained growth cycles. Copyright 1992 by Royal Economic Society.