A re-examination of Kaldor's non-linear business cycle model

Kim, Hee-chan. (2001). A re-examination of Kaldor's non-linear business cycle model Honours Thesis, School of Economics, The University of Queensland.

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Author Kim, Hee-chan.
Thesis Title A re-examination of Kaldor's non-linear business cycle model
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2001
Thesis type Honours Thesis
Total pages 65
Language eng
Subjects 14 Economics
Formatted abstract The endogenous business cycle models aim to derive endogenous cycles in an economic system without any external shocks. It has been widely believed in the literature that non-linearity is necessary for the existence of such cycles after the publication of Kaldor's paper" A Model of Trade Cycles" which dates back to the year 1940. The model of Kaldor is recognised as one of the first attempts to investigate the effects of non-linearity in dynamical economics. Endogenous forces created by interactions of non-linear saving and investment functions explain the fluctuations in his model. Kaldor argues that non-linearity in either the saving or investment functions should be a precondition to demonstrate the existence of endogenous cycles. However, Kaldor's model is not precisely formulated, and the assumptions are not adequately justified. Therefore, this thesis investigates and reexamines the ambiguities or vague ideas found in Kaldor's paper and the other literature that deals with his model. It is proved in this thesis that non-linearity is not a prerequisite for the existence of endogenous cycles. Furthermore, some assumptions and arguments made by Kaldor as well as other economists who reformulate and reinvestigate Kaldor's model are shown to be unsatisfactory because they are somewhat crude and/or inaccurate.

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