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Indeterminacy and business-cycle fluctuations in a two-sector monetary economy with externalities

  • Stefano Bosi

    ()

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université Lille II - Droit et santé - Université Lille 1 - Sciences et technologies - Université Charles-de-Gaulle Lille 3 - Sciences humaines et sociales - PRES Université Lille Nord de France)

  • Kazuo Nishimura

    ()

    (Kyoto University - Kyoto University)

  • Alain Venditti

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - AMU - Aix-Marseille Université)

We consider a two-sector economy with money-in-the-utility-function and sector-specific externalities. We provide conditions on technologies leading to the existence of local indeterminacy for any value of the interest rate elasticity of money demand, provided the elasticity of intertemporal substitution in consumption is large enough. Moreover, we show that the occurrence of multiple equilibria is intimately linked with the existence of a flip bifurcation and period-two cycles.

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Paper provided by HAL in its series Working Papers with number halshs-00432268.

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Date of creation: 15 Nov 2009
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Handle: RePEc:hal:wpaper:halshs-00432268
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