Real business cycles and the animal spirits hypothesis in a CIA economy

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Real business cycles and the animal spirits hypothesis in a CIA economy

Author Info

Barinci, Jean-Paul
Chéron, Arnaud

Additional information is available for the following registered author(s):

Arnaud Cheron

Abstract

This paper examines the dynamical properties of a one-sector cash-indvance constraint model with constant returns to scale. Its aim is to overcome some of the difficulties encountered by earlier models in establishing the empirical relevance of indeterminacy and sunspots. It is first established that, in opposition to available results, indeterminacy occurs for values of the intertemporal elasticity of substitution in consumption consistent with the bulk of empirical estimates. It is then shown that sunspot shocks generate procyclical movements in consumption. Lastly, allowing both beliefs and technological disturbances, the model is found to perform as well as real sunspot models with increasing returns to scale in matching the business cycle.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 0110.

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Length: 13 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:cpm:cepmap:0110

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-04-03 (All new papers)
NEP-DGE-2002-04-03 (Dynamic General Equilibrium)

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