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Real Business Cycles and the Animal Spirits Hypothesis in a Cash-in-Advance Economy

Author

Listed:
  • Jean-Paul Barinci

    (EPEE-Université d'Evry - Val d'Essonne and EUREQua - Université de Paris 1)

  • Arnaud Chéron

    (EUREQua - Université de Paris 1 and GAINS - Université du Maine)

Abstract

This paper examines the dynamical properties of a one-sector cash-in- advance constraint model with constant returns to scale. Its aim is to over- come some of the difficulties encountered by earlier models in establishing the empirical relevance of indeterminacy and sunspots as means to understand the business cycle. It is shown that, in opposition to available results, indeterminacy occurs for values of the intertemporal elasticity of substitution in consumption consistent with the bulk of empirical estimates. It is also shown that sunspot shocks do not necessarily generate countercyclical movements in consumption. In addition, considering simultaneously beliefs and technological disturbances, it turns out that the model performs as well as real sunspot models with increasing returns to scale in matching the business cycle.

Suggested Citation

  • Jean-Paul Barinci & Arnaud Chéron, 2001. "Real Business Cycles and the Animal Spirits Hypothesis in a Cash-in-Advance Economy," Documents de recherche 01-13, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    • Handle: RePEc:eve:wpaper:01-13
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    File URL: https://www.univ-evry.fr/fileadmin/mediatheque/ueve-institutionnel/03_Recherche/laboratoires/Epee/wp/01-13.pdf
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    Cited by:

    1. Stefano Bosi & Francesco Magris & Alain Venditti, 2003. "Indeterminacy in a Cash-in-Advance Two-Sector Economy," Documents de recherche 03-04, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.

    More about this item

    Keywords

    Money; Indeterminacy; Sunspots; Business Cycle;
    All these keywords.

    JEL classification:

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

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