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Product Scope and Endogenous Fluctuations

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  • Weder, Mark
  • Pavlov, Oscar

Abstract

Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing fi rms. Motivated by these findings, the current paper investigates the role of intrafi rm product scope choice in a general equilibrium economy with oligopolistic producers. We show that the multi-product nature of fi rms makes the economy signifi cantly more susceptible to sunspot equilibria. The estimated indeterminate model generates artifi cial business cycles that closely resemble empirically observed fl uctuations.

Suggested Citation

  • Weder, Mark & Pavlov, Oscar, 2015. "Product Scope and Endogenous Fluctuations," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112942, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112942
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    Cited by:

    1. Stephen McKnight & Laura Povoledo, 2022. "Endogenous fluctuations and international business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 312-348, February.
    2. King Yoong Lim & Diego Morris, 2023. "Firm‐level impact of the global financial crisis: Evidence on innovation from Latin America," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3902-3917, October.
    3. Pavlov, Oscar, 2021. "Multi-product firms and increasing marginal costs," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    4. Stephen McKnight & Laura Povoledo, 2015. "Can indeterminacy and self-fulfilling expectations help explain international business cycles?," Working Papers 20151504, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    5. Qazi Haque & Oscar Pavlov & Mark Weder, 2024. "Superstar Firms and Aggregate Fluctuations," School of Economics and Public Policy Working Papers 2024-01 Classification-E3, University of Adelaide, School of Economics and Public Policy.
    6. Pavlov, Oscar & Weder, Mark, 2022. "Endogenous product scope: Market interlacing and aggregate business cycle dynamics," European Economic Review, Elsevier, vol. 148(C).
    7. Xue, Jianpo & Yip, Chong K., 2018. "Home production, balanced-budget taxation and economic (in)stability," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 231-242.
    8. Wei Dai & Mark Weder & Bo Zhang, 2020. "Animal Spirits, Financial Markets, and Aggregate Instability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 2053-2083, December.
    9. Liu, Taoxiong & Liu, Zhuohao, 2022. "A growth model with endogenous technological revolutions and cycles," Journal of Mathematical Economics, Elsevier, vol. 103(C).

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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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