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Functional Sunspot Equilibria

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Author Info
Shurojit Chatterji () (Centro de Investigación Económica, ITAM)
Subir Chattopadhyay (Universidad de Alicante)
Abstract

Consider a one step forward looking model where agents believe that the equilibrium values of the state variable are determined by a function whose domain is the current value of the state variable and whose range is the value for the subsequent period. An agent's forecast for the subsequent period uses the belief, where the function that is chosen is allowed to depend on the current realization of an extrinsic random process, and is made with knowledge of the past values of the state variable but not the current value. The paper provides (and characterizes) the conditions for the existence of sunspot equilibria for the model described.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-39.

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Length: 19 pages
Date of creation: Dec 2005
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-39

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Keywords: extrinsic uncertainty stochastic equilibria

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  1. Chattopadhyay, S. & Gottardi, P., 1999. "Stochastic OLG Models, Market Structure and Optimality," Papers 99-15, Valencia - Instituto de Investigaciones Economicas.
    Other versions:
  2. James Peck, 1986. "On the Existence of Sunspot Equilibria in an Overlapping Generations Model," Discussion Papers 678, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  3. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 725-37, October. [Downloadable!] (restricted)
  4. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April. [Downloadable!] (restricted)
  5. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December. [Downloadable!] (restricted)
  6. Michael Magill & Martine Quinzii, 2003. "Indeterminacy of equilibrium in stochastic OLG models," Economic Theory, Springer, vol. 21(2), pages 435-454, 03. [Downloadable!] (restricted)
  7. Grandmont Jean-michel & Laroque G, 1990. "Economic dynamics with learning : some instability examples," CEPREMAP Working Papers (Couverture Orange) 9007, CEPREMAP.
  8. Karl Shell & Aditya Goenka, 1997. "Robustness of sunspot equilibria," Economic Theory, Springer, vol. 10(1), pages 79-98. [Downloadable!] (restricted)
  9. Chiappori, P.A. & Guesnerie, R., 1993. "Rational Random Walks," DELTA Working Papers 93-07, DELTA (Ecole normale supérieure).
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  10. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  11. Julio DÂvila, 1997. "Sunspot fluctuations in dynamics with predetermined variables," Economic Theory, Springer, vol. 10(3), pages 483-495. [Downloadable!] (restricted)
  12. Bloise, Gaetano, 2004. "A note on sunspot equilibrium in sequential economies," Research in Economics, Elsevier, vol. 58(1), pages 59-74, March. [Downloadable!] (restricted)
  13. Grandmont, Jean-Michel, 1986. "Stabilizing competitive business cycles," Journal of Economic Theory, Elsevier, vol. 40(1), pages 57-76, October. [Downloadable!] (restricted)
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