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The cobweb, borrowing and financial crises

[journal article]

Commendatore, Pasquale; Currie, Martin

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-248076

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Abstract Studies of non-linear cobweb models have failed to address a fundamental issue: whether the complex dynamical behavior displayed by such models is consistent with the survival of producers. This paper shows 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. Industry performance (in terms both of profitability and of the incidence of bankruptcies) is highly sensitive to the nature of such credit restrictions.
Classification Political Economy
Free Keywords Cobweb; Economic dynamics; Financial capital; Bankruptcy
Document language English
Publication Year 2008
Page/Pages p. 625-640
Journal Journal of Economic Behavior & Organization, 66 (2008) 3-4
DOI http://dx.doi.org/10.1016/j.jebo.2006.05.008
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)