A tutorial introduction to nonlinear dynamics in economics

Abstract

The last few years have witnessed a great interest in nonlinear dynamies. This fascinating subject has enabled both theoreticians and practitioners in many fields to handle and analyse "c1assical" problems in a new and promising way. Although some of the main ideas in nonlinear dynamics are not necessarily complicated, the average researcher is not sufficient1y acquainted with the basic concepts and terminology and this usually constitutes a difficulty which very few overcome. The main objective of this paper is to introduce the nonspecialist reader to some key ideas which have been recently used in the analysis of dynamical systems and time series in economics. In particular, special attention will be given to nonlinear dynamics, phase space reconstruction, attractors, dynamical invariants and the diagnosis of chaotic and nonlinear dynamics from time series. A number of references are provided for further reading.