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Sunspot Fluctuations on the Growth Rates

Author

Listed:
  • Gauthier, S.
  • Desgranges, G.

Abstract

This paper analyses an example of nonstationary stochastic endogenous fluctuations. It studies the existence of Markovian sunspot equilibria on the rates of growth in a linear one step forward looking economy with one predetermined variable. It is shown that asymptotically stable stochastic fluctuations arise in the neighborhood of a steady state, even if it is determinate in the perfect foresight dynamics. This leads to a generic expectations coordination failure. This problem is illustrated by an example of output fluctuations that makes less credible the coordination on the saddle-stable path converging to the determinate steady state.

Suggested Citation

  • Gauthier, S. & Desgranges, G., 1998. "Sunspot Fluctuations on the Growth Rates," DELTA Working Papers 98-09, DELTA (Ecole normale supérieure).
    • Handle: RePEc:del:abcdef:98-09
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    More about this item

    Keywords

    ECONOMIC GROWTH ; ECONOMIC EQUILIBRIUM;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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