Strange attractors in a multisector business cycle model

Abstract Three coupled oscillating sectors in a multisector Kaldor-type business cycle model can give rise to the occurrence of chaotic motion. If the sectors are linked by investment demand interdependencies, this coupling can be interpreted as a perturbation of a motion on a three-dimensional torus. A theorem by Newhouse, Ruelle and Takens implies that such a perturbation may possess a strange attractor with the consequence that the flow of the perturbed system may become irregular or chaotic. A numerical investigation reveals that parameter values can be found which indeed lead to chaotic trajectories in this cycle model.

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