Keynesian chaos revisited: odd period cycles and ergodic properties

Abstract

In this paper, we study two standard (Keynesian) dynamic macroeconomic models (one is piecewise linear and the other is nonlinear). Our purpose is twofold: (1)~For each model, we give a complete characterisation for the existence of a topological chaos (of the GDP levels), (2)~Even if a chaos exists, using ergodic theory, we show that it is possible to predict the future GDP levels "on average". This paper gives a new application of a celebrated result in ergodic theory by A. Avila (2014 fields medalist). We believe that our method/strategy in this paper is generic enough to be used to analyse many other (seemingly untractable) chaotic economic models.