In recent years, there are proposals suggesting that the Lotka-Volterra system can be used as a model of financial instability in order to prove Hyman Minsky’s financial instability hypothesis. While such a proposal looks interesting, nonetheless one should be careful on built-in assumptions in the model. For instance Lotka-Volterra’s original equations are known to be unrealistic, so if this model shows cyclical behavior, it is based on unrealistic assumptions. It can be shown that more realistic model does not show cyclical behavior.
Therefore, my question is: Can one come up with a model of financial instability starting from The Lotka-Volterra system?
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