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; Currie, M.. - In: JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION. - ISSN 0167-2681. - STAMPA. - 66:3-4(2008), pp. 625-640. [10.1016/j.jebo.2006.05.008]
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.File | Dimensione | Formato | |
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