Indeterminacy and Sunspot Fluctuations in Two-Sector RBC models: Theory and Calibration
AbstractWe analyze sunspot-driven fluctuations in the standard 2-sector RBC model with moderate increasing returns to scale. We provide a detailed theoretical analysis enabling us to derive relevant bifurcation loci and to characterize the steady-state local stability properties as a function of various structural parameters. With GHH preferences, we show that local indeterminacy occurs through flip and Hopf bifurcations for a large set of values of the elasticity of intertemporal substitution in consumption if the labor supply is sufficiently inelastic. With additively-separable preferences, we prove that local indeterminacy occurs through flip and Hopf bifurcations for any value of the elasticity of the labor supply, and can even be compatible with an arbitrarily low elasticity of intertemporal substitution in consumption. Finally, we provide a detailed quantitative analysis of the model. Computing, on a quarterly basis, a new set of empirical moments related to two broadly defined consumption and investment sectors, we are able to identify, among the set of admissible calibrations consistent with sunspot equilibria, the ones that provide the best fit of the data. The model properly calibrated solves several empirical puzzles traditionally associated with 2-sector RBC models.
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Date of creation: Feb 2013
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indeterminacy; sunspots; two-sector model; sector-specific externalities; real business cycles;
Other versions of this item:
- Frédéric Dufourt & Kazuo Nishimura & Alain Venditti, 2013. "Indeterminacy and Sunspot Fluctuations in Two-Sector RBC models: Theory and Calibration," AMSE Working Papers 1315, Aix-Marseille School of Economics, Marseille, France, revised Nov 2009.
- Frederic Dufourt & Kazuo Nishimura & Alain Venditti, 2013. "Indeterminacy and sunspot fluctuations in two-sector RBC models: theory and calibration," Working Papers halshs-00796236, HAL.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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