# American Institute of Mathematical Sciences

## How interest rate influences a business cycle model

 1 School of Mathematics and Statistics, Zhengzhou University, Zhengzhou 450000, China 2 School of Business, Macau University of Science and Technology, Macau 999078, China 3 Henan Academy of Big Data, Zhengzhou University, Zhengzhou 450002, China

* Corresponding author: Jingli Ren

Received  November 2018 Revised  May 2019 Published  December 2019

Fund Project: This research is supported by the National Natural Science Foundation of China (11771407), and the Innovative Research Team of Science and Technology in Henan Province (17IRTSTHN007)

We study the effect of interest rate on phenomenon of business cycle in a Kaldor-Kalecki model. From the information of the People's Bank of China and the Federal Reserve System, we know the interest rate is not a constant but with remarkable periodic volatility. Therefore, we consider periodically forced interest rate in the model and study its dynamics. It is found that, both limit cycle through Hopf bifurcation in unforced system and periodic solutions generated by period doubling bifurcation or resonance in periodically forced system, can lead to cyclical economic fluctuations. Our analysis reveals that the cyclical fluctuation of interest rate is one of a key formation mechanism of business cycle, which agrees well with the pure monetary theory on business cycle. Moreover, this fluctuation can cause chaos in a business cycle system.

Citation: Qigang Yuan, Yutong Sun, Jingli Ren. How interest rate influences a business cycle model. Discrete & Continuous Dynamical Systems - S, doi: 10.3934/dcdss.2020190
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##### References:
S-shape of $I(Y)$
Fluctuations of interest rate. (a) Interest rate of FED from September 1986 to February 2007; (b) Interest rate of PBC from July 1998 to October 2015
Phase portraits of a fold bifurcation of system (5) for $\alpha = 2$, $\beta = 0.6$, $\gamma = 0.283368$, $\delta = 0.3$, $m = 2.294$, $n = 4.612$, $C_{0} = 0.2$. (a) $d = 0.6$. (b) $d = 0.750017$. (c) $d = 0.8$
Bifurcation diagram of system (5) in $d-\gamma$ plane for $\alpha = 3$, $\beta = 0.6$, $\delta = 0.3$, $m = 3$, $n = 5.6$, $C_{0} = 0.6$
Phase portrait of Hopf bifurcation of system (5) for $\alpha = 3$, $\beta = 0.6$, $d = 0.195$, $\delta = 0.3$, $m = 3$, $n = 5.6$, $C_{0} = 0.6$. (a) Supercritical Hopf bifurcation for $\gamma = 1.175$. (b) Subcritical Hopf bifurcation for $\gamma = 0.66$
Time series of limit cycles corresponding to the cases in Fig. 5. (a) Stable limit cycle generated by supercritical Hopf bifurcation for $\gamma = 1.175$. (b) Stable limit cycle in system (5) for case $\gamma = 0.66$. (c) Unstable limit cycle generated by subcritical Hopf bifurcation for $\gamma = 0.66$
(b) Bifurcation diagrams of the forced system in with $\alpha = 3, \beta = 0.6, \gamma = 0.4, \delta = 0.3, m = 3, n = 5.6, C_{0} = 0.2$. (c) partial enlargements of (b)
(a) Bifurcation diagrams of the forced system in with $\alpha = 3, \beta = 0.6, \gamma = 0.7, \delta = 0.3, m = 3.6, n = 10.58, C_{0} = 0.2$. (b) partial enlargements of (a)
(a) Bifurcation diagrams of the forced system in $(\epsilon - d)$ plane with $\alpha = 5, \beta = 0.6, \gamma = 0.85, \delta = 0.3, m = 3.211, n = 3.368, C_{0} = 1$
(a) Bifurcation diagrams of the forced system in $(\epsilon - d)$ plane with $\alpha = 5, \beta = 0.6, \gamma = 0.8, \delta = 0.3, m = 3.211, n = 3.368, C_{0} = 1$
Phase portrait of different solutions. (a) A stable period-two orbit for $d = 0.3, \epsilon = 0.8$. (b), (c) Poincaré section and Time series of the stable period-two orbit. (d) A stable period-four orbit for $\ d = 0.18, \epsilon = 0.8$. (e), (f) Poincaré section and Time series of the stable period-four orbit. (g) Phase portrait of torus for $d = 0.2, \epsilon = 0.1$. (h), (i) Poincaré section and Time series of the torus
Phase portrait of chaotic attractor. (a) Chaotic attractor through cascade of period doublings for $d = 0.25, \epsilon = 0.5$. (b), (c) Corresponding Poincaré section and Time series of (a). (d) Chaotic attractor through torus destruction for $d = 0.2, \epsilon = 0.2$. (e), (f) Corresponding Poincaré section and Time series of (d)
(a) Spectrum of largest Lyapunov exponents for $\epsilon = 0.5$. (b) Spectrum of largest Lyapunov exponents for $\epsilon = 0.2$
(a) Bifurcation diagram in $(Y-d)$ plane for $\epsilon = 0.5$. (b) Bifurcation diagram in $(Y-d)$ plane for $\epsilon = 0.2$
(a) A stable period-three orbit for $\gamma = 0.85,d = 0.45, \epsilon = 0.2$. (b), (c) Poincaré section and Time series of the stable period-three orbit. (d) A stable period-five orbit for $\gamma = 0.8,d = 0.235, \epsilon = 0.7$. (e), (f) Poincaré section and Time series of the stable period-five orbit
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