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Sunspot fluctuations in two-sector models: New results with additively separable preferences

Author

Listed:
  • Frédéric Dufourt

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Kazuo Nishimura

    (KIER, Kyoto University - Kyoto University, RIEB, Kobe University - Kobe University)

  • Alain Venditti

    (Edhec Business School - Edhec - EDHEC - EDHEC Business School - UCL - Université catholique de Lille, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We analyze local indeterminacy and sunspot-driven fluctuations in the standard two-sector model with additively separable preferences. We provide a detailed theoretical analysis enabling us to derive relevant bifurcation loci and to characterize the steady-state local stability properties as a function of various structural parameters influencing the degree of increasing returns to scale, the amount of intertemporal substitution in consumption, and the elasticity of the aggregate labor supply curve. On the theoretical side, we prove the existence of both a flip and a Hopf bifurcation locus in the corresponding parameter space. We also show that local indeterminacy can be obtained under any labor supply elasticity or under an arbitrarily low elasticity of intertemporal substitution in consumption. On the empirical side, we find that indeterminacy and sunspot fluctuations are robust features of two-sector models, prevailing for most empirically plausible calibrations for these parameters. (This abstract was borrowed from another version of this item.)

Suggested Citation

  • Frédéric Dufourt & Kazuo Nishimura & Alain Venditti, 2023. "Sunspot fluctuations in two-sector models: New results with additively separable preferences," Working Papers hal-01447848, HAL.
    • Handle: RePEc:hal:wpaper:hal-01447848
    DOI: 10.1111/ijet.12081
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01447848
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    More about this item

    Keywords

    ndeterminacy; sunspots; two-sector model; sector-specific externalities; real business cycles;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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