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Sunspot equilibria in a monetary economy with capital accumulation

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  • BLOISE, Gaetano
  • MAGRIS, Francesco

Abstract

In this paper, we consider the determinacy of equilibrium prices, interest rate and income in an economy with liquidity constraints and capital accumulation. In particular, we show that, even though no extrinsic uncertainty effects fundamentals, under some conditions, rational expectations equilibria exist in which prices and quantities exhibit repetitive and persistent fluctuations. To prove the existence of such sunspot equilibria, we introduce a technique of general applicability to nonlinear macroeconomic models.

Suggested Citation

  • BLOISE, Gaetano & MAGRIS, Francesco, 2000. "Sunspot equilibria in a monetary economy with capital accumulation," LIDAM Discussion Papers CORE 2000040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2000040
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2000.html
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    References listed on IDEAS

    as
    1. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
    2. Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-944, October.
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    Cited by:

    1. Bloise, Gaetano, 2001. "A Geometric Approach to Sunspot Equilibria," Journal of Economic Theory, Elsevier, vol. 101(2), pages 519-539, December.
    2. Bloise, Gaetano, 2004. "A note on sunspot equilibrium in sequential economies," Research in Economics, Elsevier, vol. 58(1), pages 59-74, March.

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