Stability and bifurcations in IS-LM economic models

In this note, we analyze the local dynamics of a general non-linear fixedprice disequilibrium IS-LM model. We assume investment behavior as a general nonlinear function avoiding any Kaldor type assumption. By proving the existence of a family of periodic solutions bifurcating from a steady state, we confirm and extend some results in the literature for IS-LM models reducible to Leinard’s equation. We use bifurcation theory and study the effect of a change of the adjustment parameter in the money market upon the solutions of the model as the steady state loses stability.