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Indeterminacy and business-cycle fluctuations in a two-sector monetary economy with externalities

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Author Info

  • Stefano Bosi

    () (EQUIPPE - Université de Lille I)

  • Kazuo Nishimura

    () (Kyoto University - Kyoto University)

  • Alain Venditti

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

Abstract

We consider a two-sector economy with money-in-the-utility-function and sector-specific externalities. We provide conditions on technologies leading to the existence of local indeterminacy for any value of the interest rate elasticity of money demand, provided the elasticity of intertemporal substitution in consumption is large enough. Moreover, we show that the occurrence of multiple equilibria is intimately linked with the existence of a flip bifurcation and period-two cycles.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00432268.

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Date of creation: 15 Nov 2009
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Handle: RePEc:hal:wpaper:halshs-00432268

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00432268/en/
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Related research

Keywords: Money-in-the-utility-function ; two-sector economy ; sector-specific externalities ; indeterminacy ; period-two cycles ; sunspot equilibria;

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