This paper examines, within the framework of a multidimensional one-step forward-looking model, a special category of rational expectations equilibria. Their support is infinite with two accumulation points (steady states); the stochastic motion of the system is of random-walk type. A general strategy for an existence proof--associated with the study of a dynamical systems--stresses necessary conditions. In a simple overlapping-generations model, the proof is made complete--no backwards-bending labor supply is required in the pure sunspot case. By continuity, heteroclinic random walk equilibria are also shown to exist when shocks are real. Copyright 1993 by The Review of Economic Studies Limited.
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Volume (Year): 60 (1993) Issue (Month): 4 (October) Pages: 837-64 Download reference. The following formats are available: HTML
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