Studies of non-linear cobweb models have failed to address a fundamental issue: whether the complex dynamicalbehaviordisplayedbysuchmodelsisconsistentwiththesurvivalofproducers.Thispapershows that where borrowing is unconstrained, as is implicitly assumed in standard cobweb models, borrowing results in financial crises. Incorporating constraints on borrowing is needed to salvage cobweb models. Industryperformance(intermsbothofprofitabilityandoftheincidenceofbankruptcies)ishighlysensitive tothenatureofsuchcreditrestrictions. © 2007ElsevierB.V.All rightsreserved.

The cobweb, borrowing and financial crises

COMMENDATORE, PASQUALE;
2008

Abstract

Studies of non-linear cobweb models have failed to address a fundamental issue: whether the complex dynamicalbehaviordisplayedbysuchmodelsisconsistentwiththesurvivalofproducers.Thispapershows that where borrowing is unconstrained, as is implicitly assumed in standard cobweb models, borrowing results in financial crises. Incorporating constraints on borrowing is needed to salvage cobweb models. Industryperformance(intermsbothofprofitabilityandoftheincidenceofbankruptcies)ishighlysensitive tothenatureofsuchcreditrestrictions. © 2007ElsevierB.V.All rightsreserved.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11588/101237
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