Bonding and dynamical changes

This theoretical exercise looks at how public expenditures for bonding can change the internal dynamics of an economic system. This new approach allows for a model of growth with institutions. These institutions, called bonding institutions, will put an economic system attracted by a low and stable equilibrium output onto a path of economic growth. Questions such as under what circumstances these institutions will come into place and whether their result, a new and higher output level, is a stable outcome of the system can now be addressed.