Fractals in nonlinear economic dynamic systems

In this paper we have examined how in nonlinear economic systems the existence of fractal basin boundaries have important implications as regards policy formulation. We have shown that in situations where several stable steady-state solutions coexist basin boundaries may be highly intertwined, such that uncertainties in the specification of the initial conditions, or indeed parameter values, might result in long-term unpredictability. This has important policy implications since uncertainty in determining the present state of the economy may lead to great difficulty in predicting its future state.