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

Author

Listed:
  • Stefano Bosi

    () (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Kazuo Nishimura

    () (Kyoto University [Kyoto])

  • Alain Venditti

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

Abstract

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.

Suggested Citation

  • Stefano Bosi & Kazuo Nishimura & Alain Venditti, 2009. "Indeterminacy and business-cycle fluctuations in a two-sector monetary economy with externalities," Working Papers halshs-00432268, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00432268
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00432268
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    Keywords

    Money-in-the-utility-function; two-sector economy; sector-specific externalities; indeterminacy; period-two cycles; sunspot equilibria;

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