ABSTRACT
This chapter 1 investigates a positive self-reference of the rate of inflation onto itself as it can exist in a standard IS–LM model with an appropriately formulated wage-price dynamics. The self-reference is given by a 3-D analog to the positive feedback mechanism of the Harrodian analysis of unstable steady growth. It is shown in particular that this self-reference can overturn the local asymptotic stability of such an IS–LM model by means of so-called Hopf-bifurcations if the adjustment speed of the price level becomes sufficiently large.
