Indeterminacy and business-cycle fluctuations in a two-sector monetary economy with externalities
AbstractWe 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 InfoPaper provided by HAL in its series Working Papers with number halshs-00432268.
Date of creation: 15 Nov 2009
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Money-in-the-utility-function ; two-sector economy ; sector-specific externalities ; indeterminacy ; period-two cycles ; sunspot equilibria;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-21 (All new papers)
- NEP-CBA-2009-11-21 (Central Banking)
- NEP-DGE-2009-11-21 (Dynamic General Equilibrium)
- NEP-MAC-2009-11-21 (Macroeconomics)
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