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Chaos, sunspots, and automatic stabilizers Author info | Abstract | Publisher info | Download info | Related research | Statistics Lawrence J. Christiano
Sharon G. Harrison
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We study a one-sector growth model which is standard except for the presence of an externality in the production function. The set of competitive equilibria is large. It includes constant equilibria, sunspot equilibria, cyclical and chaotic equilibria, and equilibria with deterministic or stochastic regime switching. The efficient allocation is characterized by constant employment and a constant growth rate. We identify an income tax-subsidy schedule that supports the efficient allocation as the unique equilibrium outcome. That schedule has two properties: (i) it specifies the tax rate to be an increasing function of aggregate employment, and (ii) earnings are subsidized when aggregate employment is at its efficient level. The first feature eliminates inefficient, fluctuating equilibria, while the second induces agents to internalize the externality.
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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number
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Date of creation: 1996Date of revision:
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Keywords: Chaotic behavior in systems ; Income tax ; Other versions of this item:
Article Paper Lawrence J. Christiano & Sharon G. Harrison, 1996.
"Chaos, Sunspots, and Automatic Stabilizers ,"
NBER Working Papers
5703, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Lawrence J. Christiano & Sharon G. Harrison, 1996.
"Chaos, sunspots, and automatic stabilizers ,"
Working Paper Series, Macroeconomic Issues
WP-96-16, Federal Reserve Bank of Chicago.
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CEPR Discussion Papers
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UCLA Economics Working Papers
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Journal of Monetary Economics ,
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"Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth ,"
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Farmer, Roger E.A. & Woodford, Michael, 1997.
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Burnside, A Craig & Eichenbaum, Martin & Rebelo, Sérgio, 1995.
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Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995.
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NBER Working Papers
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RCER Working Papers
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McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997.
"An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy ,"
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Journal of Monetary Economics ,
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The Quarterly Journal of Economics ,
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"Testing for sunspot equilibria in the German hyperinflation ,"
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Finance and Economics Discussion Series
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Rotemberg, Julio J & Woodford, Michael, 1996.
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American Economic Review ,
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Carnegie-Rochester Conference Series on Public Policy ,
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NBER Chapters ,
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National Bureau of Economic Research, Inc.
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Journal of Political Economy ,
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Econometrica ,
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"Introduction to the Symposium on Growth, Fluctuations, and Sunspots: Confronting the Data ,"
Journal of Economic Theory ,
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"Self-fulfilling prophecies ,"
Journal of Economic Theory ,
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"Monopolistic Competition, Price Setting and the Effcts of Real and Monetary Shocks ,"
UBC Departmental Archives
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Journal of Economic Theory ,
Elsevier, vol. 58(2), pages 198-218, December.
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Journal of Political Economy ,
University of Chicago Press, vol. 91(3), pages 401-19, June.
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"Monopolistic competition, endogenous markups, and growth ,"
European Economic Review ,
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"Factor-Hoarding and the Propagation of Business-Cycle Shocks ,"
American Economic Review ,
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"Endogenous Fluctuations ,"
DELTA Working Papers
91-10, DELTA (Ecole normale supérieure).
Krugman, Paul, 1991.
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The Quarterly Journal of Economics ,
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Bryant, John, 1983.
"A Simple Rational Expectations Keynes-Type Model ,"
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Lawrence J. Christiano & Martin Eichenbaum, 1990.
"Current real business cycle theories and aggregate labor market fluctuations ,"
Discussion Paper / Institute for Empirical Macroeconomics
24, Federal Reserve Bank of Minneapolis.
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Lawrence J. Christiano & Martin Eichenbaum, 1990.
"Current real business cycle theories and aggregate labor market fluctuations ,"
Working Paper Series, Macroeconomic Issues
90, Federal Reserve Bank of Chicago.
Christiano, Lawrence J & Eichenbaum, Martin, 1992.
"Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations ,"
American Economic Review ,
American Economic Association, vol. 82(3), pages 430-50, June.
[Downloadable!] (restricted) Farmer Roger E. A. & Guo Jang-Ting, 1994.
"Real Business Cycles and the Animal Spirits Hypothesis ,"
Journal of Economic Theory ,
Elsevier, vol. 63(1), pages 42-72, June.
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"Why does inventory investment fluctuate so much? ,"
Journal of Monetary Economics ,
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Cole, Harold L & Kehoe, Timothy J, 2000.
"Self-Fulfilling Debt Crises ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 67(1), pages 91-116, January.
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"Three Questions about Sunspot Equilibria as an Explanation of Economic Fluctuations ,"
American Economic Review ,
American Economic Association, vol. 77(2), pages 93-98, May.
Romer, Paul M, 1987.
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American Economic Review ,
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Hansen, Lars Peter & Singleton, Kenneth J, 1982.
"Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models ,"
Econometrica ,
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Dale T. Mortensen, 1988.
"The Persistence and Indeterminacy of Unemployment in Search Equilibrium ,"
Discussion Papers
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