Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957474 | Journal of Economic Theory | 2008 | 14 Pages |
Abstract
This note analyzes how the indeterminacy of competitive equilibrium in one-sector growth models depends on the magnitude of the households' income effect on the demand for leisure. Since I am interested in quantitatively characterizing regions of indeterminacy, I use the Jaimovich and Rebelo [N. Jaimovich, S. Rebelo, Can news about the future drive the business cycle? Mimeo, Northwestern University, 2007] preferences that span a wide range of income effect values. I find that indeterminacy can occur for levels of aggregate-returns-to-scale that are well within recent empirical estimates. For these regions of indeterminacy, the model, when driven solely by sunspot shocks, generates second-moment properties that are consistent with the U.S. data at the business cycle frequency.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Nir Jaimovich,