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On the Existence of Nonoptimal Equilibria in Dynamic Stochastic Economies

  • Greenwood Jeremy
  • Huffman Gregory W.

The question of the existence of the stationary equilibrium for distorted versions of the standard neo-classical growth model is addressed in this paper. The conditions presented guaranteeing the existence of nontrivial equilibrium for the class of economies under study are simple and intuitively appealing, while the existence proof developed is elementary. Examples are given illustrating that economies with distortional taxation, endogenous growth with externalities, and monopolistic competition can all fit into the framework provided.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(85)71024-1
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 65 (1995)
Issue (Month): 2 (April)
Pages: 611-623

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Handle: RePEc:eee:jetheo:v:65:y:1995:i:2:p:611-623
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  2. Wilbur John Coleman, 1989. "Equilibrium in a production economy with an income tax," International Finance Discussion Papers 366, Board of Governors of the Federal Reserve System (U.S.).
  3. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  4. Nobuhiro Kiyotaki, 1988. "Multiple Expectational Equilibria Under Monopolistic Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 695-713.
  5. Hercovitz, Z. & Sampson, M., 1989. "Output Growth, The Real Wage, And Employment Fluctuations," RCER Working Papers 179, University of Rochester - Center for Economic Research (RCER).
  6. Gomme, P., 1993. "Money and Growth Revisited : Measuring the Costs of Inflation in an Endogenous Growth Model," Discussion Papers dp93-03, Department of Economics, Simon Fraser University.
  7. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  8. Baxter, M., 1988. "Approximating Suboptimal Dynamic Equilibria: An Euler Equation Approach," RCER Working Papers 139, University of Rochester - Center for Economic Research (RCER).
  9. Danthine, Jean-Pierre & Donaldson, John B., 1990. "Efficiency wages and the business cycle puzzle," European Economic Review, Elsevier, vol. 34(7), pages 1275-1301, November.
  10. Wilbur John Coleman, 1988. "Money, interest, and capital in a cash-in-advance economy," International Finance Discussion Papers 323, Board of Governors of the Federal Reserve System (U.S.).
  11. Danthine, J.P. & Donaldson, J.B., 1993. "Computing Equilibria of Non-Optimal Economies," Papers 93-01a, Columbia - Graduate School of Business.
  12. Coleman, Wilbur John, II, 1990. "Solving the Stochastic Growth Model by Policy-Function Iteration," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 27-29, January.
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