Non-linear dynamics and chaos in optimal growth: An example

Abstract

In the recent literature, it has been demonstrated that optimal capital accumulation may be chaotic; see Boldrin and Montrucchio (1986) and Deneckere and Pelikan (1986).1 This finding indicates, as Scheinkman (1990) discusses, that the deter-ministic equilibrium model of a dynamic economy may explain various complex dynamic behaviors of economic variables, and, in fact, search for such explanations has already begun (see Brock 1986; Scheinkman and LeBaron 1989, for example).