Empirical and theoretical evidence of economic chaos

Empirical and theoretical investigations of chaotic phenomena in macroeconomic systems are presented. Basic issues and techniques in testing economic aggregate movements are discussed. Evidence of low-dimensional strange attractors is found in several empirical monetary aggregates. A continuous-time deterministic model with delayed feedback is proposed to describe the monetary growth. Phase transition from periodic to chaotic motion occurs in the model. The model offers an explanation of the multiperiodicity and irregularity in business cycles and of the low dimensionality of chaotic monetary attractors. Implications for monetary control policy and a new approach to forecasting business cycles are suggested.