In this paper, we provide a detailed analytical treatment of the behavioral macroeconomic model by De Grauwe and Ji (2020 Structural reforms, animal spirits, and monetary policies. European Economic Review 124, 103395). Although the model’s dynamics is governed by a high-dimensional nonlinear law of motion, we are able to derive necessary and sufficient conditions for the local asymptotic stability of its fundamental steady state. Specifically, we find that under the authors’ baseline parameter setting, the fundamental steady state is locally asymptotically stable, implying that the dynamics of booms and busts only arise when exogenous shocks hit the system. However, we also identify conditions under which boom-bust dynamics emerge temporarily endogenously from within the model. By doing so, we may contribute to a deeper understanding of how booms and busts can arise in such a framework – insights that central banks can use to design more effective monetary policies.

This paper deals with the phenomenon of poverty-trap regimes in Mexico, that is, self-reinforcing mechanisms in which municipalities which start poor remain poor. We develop a coordination game of poverty traps driven by strategic interactions of economic agents: people choose to complete or not their education levels since it might be excessively costly and unprofitable. A one-shot game is constructed and then converted into a system of differential equations in which strategies that perform relatively better become more abundant in the population. Applying evolutionary games and symbolic-regimes dynamics (nonparametric and nonlinear techniques), we show that Mexican regions are in poverty-trap regimes (stable and dynamically evolving low-level equilibria) characterized by incomplete education and low income since initial conditions (education and income per capita) are such (very precarious) that poverty is the stable steady-state situation. We examine scenarios to show that to overcome the high-poverty regime by the year 2030, it is necessary to reduce incomplete education by 10% in the 5-year periods 2020–2025 and 2025–2030 and increase per-capita income by 10% in both periods.