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Endogenous business cycles: capital-labor substitution and liquidity constraint with increasing returns to scale

Author

Listed:
  • BOSI, Stefano

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • MAGRIS, Francesco

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

It is well known from the literature that the introduction of financial constraints in economies with infinite-lived agents can be responsible for the occurrence of multiple equilibria and en- dogenous fluctuations. However, the question of the persistence of such phenomena when the constraints are progressively relaxed remains open. By departing from Cazzavillan, Lloyd-Braga and Pintus (1996) framework with heterogeneous agents and positive externalities in aggregate capital and labor, we show that endogenous fluctuations can persist for a wide range of the financial constraint.

Suggested Citation

  • BOSI, Stefano & MAGRIS, Francesco, 1997. "Endogenous business cycles: capital-labor substitution and liquidity constraint with increasing returns to scale," LIDAM Discussion Papers CORE 1997069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1997069
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1997.html
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    Cited by:

    1. Bosi, Stefano & Magris, Francesco, 2002. "Endogenous business cycles: Capital-labor substitution and liquidity constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 26(11), pages 1901-1926, September.

    More about this item

    Keywords

    bifurcations; sunspots; endogenous fluctuations;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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