Threshold nonlinearities and asymmetric endogenous business cycles

Junichiro Ishida, Masanori Yokoo

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

This paper presents a model of endogenous business cycles in the presence of knowledge spillovers and a time-to-build restriction. There are two key assumptions that characterize the model: (i) the payoff to each firm depends on the aggregate state of knowledge, and (ii) the innovation of a project is time-consuming. Under those assumptions, a simple structure is shown to be described by a piecewise linear difference equation with a discontinuity. We show that the resulting dynamics generated by such a dynamical system leads to an asymmetric periodic cycle of arbitrary period that appears to switch repeatedly between different regimes.

Original languageEnglish
Pages (from-to)175-189
Number of pages15
JournalJournal of Economic Behavior and Organization
Volume54
Issue number2
DOIs
Publication statusPublished - Jun 1 2004

Keywords

  • Asymmetric periodic cycles
  • Knowledge spillovers
  • Piecewise linear difference equation
  • Threshold nonlinearities
  • Time-to-build

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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