An alternative model of a nonlinear business cycle

The purpose of this paper is to develop a piecewise linear model to understand complex dynamics that arise out of sophisticated nonlinear macrodynamic models developed by Hicks and Goodwin. This piecewise analogue has several advantages: (i) it is a natural extension of a linear accelerator; (ii) it exhibits all the qualitative results of Goodwin's model; (iii) it enables one to conveniently derive newer bounds on output; and (iv) students find its representation appealing and understandable. The use of computer software is advocated for complex economic models that are described by systems of differential equations. To this end, the usefulness of STELLA (a Macintosh-based software) in verifying the qualitative predictions of the analysis, is illustrated.