Chaotic dynamics and bifurcation in a macro model

The qualitative dynamics of a discrete time version of a deterministic, continuous time, nonlinear macro model formulated by Haavelmo are fully characterized. Recently developed methods of symbolic dynamics and ergodic theory are shown to provide a simple, effective means of analyzing the behavior of the resulting one-parameter family of first-order, deterministic, nonlinear difference equations. A complex periodic and random ‘aperiodic’ orbit structure dependent on a key structural parameter is present, which contrasts with the total absence of such complexity in Haavelmo's continuous time version. Several implications for dynamic economic modelling are discussed.