Indeterminacy, business cycles, and modest increasing returns to scale
AbstractIn this paper a dynamic model of monopolistic competition with entry and exit has been presented and examined. It is shown that the model displays indeterminacy at modest degrees of increasing returns in cases where the market power in the consumption goods market and in the investment goods market differs. Furthermore, the model is quite successful in replicating major U.S. business cycle facts. In contrast to existing Real Business Cycle models, the animal spirits model contains a strong endogenous propagation mechanism. --
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Bibliographic InfoPaper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 1997,60.
Date of creation: 1997
Date of revision:
Sunspots; technology shocks; economic fluctuations;
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