Sunspot Fluctuations around a Steady State: The Case of Multidimensional One-Step forward Looking Economic Models
AbstractThe paper investigates the existence of stationary sunspot equilibria (SSE) in the vicinity of a steady state in a general, one-step forward looking economic model of dimension n. It is shown that, whenever the steady state is indeterminate, for the associated deterministic dynamics--i.e., there exists a continuum of perfect foresight paths converging to the steady state--then there exists a continuum of SSE of finite order in any neighborhood of the steady state. The proof relies upon bifurcation theory; it provides a characterization of the random processes for which SSE may appear and a description of the location of the support of the SSE close to the bifurcation. The results apply in particular to linear models. Copyright 1992 by The Econometric Society.
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Bibliographic InfoPaper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 90-02.
Length: 45 pages
Date of creation: 1990
Date of revision:
Publication status: Published in Econometrica, 1992, 60 (5), pp. 1097-1126
economic models ; expectations ; business cycles;
Other versions of this item:
- Chiappori, Pierre-Andre & Geoffard, Pierre-Yves & Guesnerie, Roger, 1992. "Sunspot Fluctuations around a Steady State: The Case of Multidimensional, One-Step Forward Looking Economic Models," Econometrica, Econometric Society, vol. 60(5), pages 1097-126, September.
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