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Indeterminacy and the Stability Puzzle in Non-Convex Economies

  • George W Evans und Bruce McGough
Veröffentlicht/Copyright: 2. September 2005
Topics in Macroeconomics
Aus der Zeitschrift Topics in Macroeconomics Band 5 Heft 1

Abstract

We examine stability under learning of sunspot equilibria in Real Business Cycle type models with indeterminacies. Our analysis emphasizes the importance of examining alternative representations of sunspot solutions. A general bivariate reduced form contains parameter regions in which sunspots are stable under learning. However, for parameters restricted to those generated by standard models of indeterminacy, we find, under one information assumption, that no stable sunspots exist, and under another information assumption, that they exist only for a very small part of the indeterminacy region. This leads to the following puzzle: why does indeterminacy almost always imply instability in RBC-type models?

Keywords: business cycles; sunspots; expectations; learning
Published Online: 2005-09-02

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

Artikel in diesem Heft

  1. Advances Article
  2. Comparing Wealth Effects: The Stock Market versus the Housing Market
  3. Optimal Time-Consistent Taxation with International Mobility Of Capital
  4. The Great Inflation of the Seventies: What Really Happened?
  5. Contributions Article
  6. The Effects of Industrialization on Education and Youth Labor in Indonesia
  7. A Closed Form Ramsey Saddle Path
  8. Indeterminacy, Stabilization Policy and Returns to Scale: A Re-Investigation
  9. Hiccups for HIPCs? Implications of Debt Relief for Fiscal Sustainability and Monetary Policy
  10. The Effects of Reducing Firing Costs in Spain: A Lost Opportunity?
  11. The Buffer-Stock Consumption Model with Endogenous Income Shifts
  12. Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle
  13. Indeterminacy and the Stability Puzzle in Non-Convex Economies
  14. The Underestimated Virtues of the Two-sector AK Model
  15. How Well Does the New Keynesian Sticky-Price Model Fit the Data?
  16. Exchange Rates and Fiscal Adjustments: Evidence from the OECD and Implications for the EMU
  17. Changing Technology Trends, Transition Dynamics, and Growth Accounting
  18. The 3-Equation New Keynesian Model --- A Graphical Exposition
  19. Topics Article
  20. Transparency and Reputation: The Publication of Central Bank Forecasts
  21. Technology Adoption in Follower Countries: With or Without Local R&D Activities?
  22. Non-Scale Models of R&D-based Growth: The Market Solution
  23. Parameter Instability, Model Uncertainty and the Choice of Monetary Policy
  24. Job Insecurity, Reallocation and Technological Innovation in a Self-Fulfilling Prophecy
  25. The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act
  26. Roads versus Schooling: Growth Effects of Government Choices
  27. Matching Up the Data on Education with Economic Growth Models
  28. An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000
  29. Exchange Rate Regimes and Financial Dollarization: Does Flexibility Reduce Currency Mismatches in Bank Intermediation?
  30. U.S. Regional Income and Technology: A Unit-Root and Cointegration Study
  31. Firm Entry with an Imperfect Labor Market
  32. Fiscal Policy and the Price Level
  33. Income Taxation, Productive Government Expenditure and Stochastic Growth: On Conditions for an Optimal Policy and the Role of the Risk Premium
  34. Income and Wealth Distributions Along the Business Cycle: Implications from the Neoclassical Growth Model
  35. Ramsey-Friedman Optimality with Banking Time
  36. Optimal Fiscal Policy with Rationing in the Labor Market
  37. The Monetary Policy Committee's Reaction Function: An Exercise in Estimation
  38. Policy Effects in the Post Boom U.S. Economy
  39. Human Capital and Growth: An Alternative Accounting
  40. Growing Old Together: Firm Survival and Employee Turnover
  41. Vertical Diversity, Communication Gap and Equilibrium Growth
  42. Should Developing Countries Strengthen their Intellectual Property Rights?
  43. Capital Accumulation in Private Information Economies
https://doi.org/10.2202/1534-6005.1264
Schlagwörter für diesen Artikel
business cycles; sunspots; expectations; learning

Artikel in diesem Heft

  1. Advances Article
  2. Comparing Wealth Effects: The Stock Market versus the Housing Market
  3. Optimal Time-Consistent Taxation with International Mobility Of Capital
  4. The Great Inflation of the Seventies: What Really Happened?
  5. Contributions Article
  6. The Effects of Industrialization on Education and Youth Labor in Indonesia
  7. A Closed Form Ramsey Saddle Path
  8. Indeterminacy, Stabilization Policy and Returns to Scale: A Re-Investigation
  9. Hiccups for HIPCs? Implications of Debt Relief for Fiscal Sustainability and Monetary Policy
  10. The Effects of Reducing Firing Costs in Spain: A Lost Opportunity?
  11. The Buffer-Stock Consumption Model with Endogenous Income Shifts
  12. Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle
  13. Indeterminacy and the Stability Puzzle in Non-Convex Economies
  14. The Underestimated Virtues of the Two-sector AK Model
  15. How Well Does the New Keynesian Sticky-Price Model Fit the Data?
  16. Exchange Rates and Fiscal Adjustments: Evidence from the OECD and Implications for the EMU
  17. Changing Technology Trends, Transition Dynamics, and Growth Accounting
  18. The 3-Equation New Keynesian Model --- A Graphical Exposition
  19. Topics Article
  20. Transparency and Reputation: The Publication of Central Bank Forecasts
  21. Technology Adoption in Follower Countries: With or Without Local R&D Activities?
  22. Non-Scale Models of R&D-based Growth: The Market Solution
  23. Parameter Instability, Model Uncertainty and the Choice of Monetary Policy
  24. Job Insecurity, Reallocation and Technological Innovation in a Self-Fulfilling Prophecy
  25. The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act
  26. Roads versus Schooling: Growth Effects of Government Choices
  27. Matching Up the Data on Education with Economic Growth Models
  28. An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000
  29. Exchange Rate Regimes and Financial Dollarization: Does Flexibility Reduce Currency Mismatches in Bank Intermediation?
  30. U.S. Regional Income and Technology: A Unit-Root and Cointegration Study
  31. Firm Entry with an Imperfect Labor Market
  32. Fiscal Policy and the Price Level
  33. Income Taxation, Productive Government Expenditure and Stochastic Growth: On Conditions for an Optimal Policy and the Role of the Risk Premium
  34. Income and Wealth Distributions Along the Business Cycle: Implications from the Neoclassical Growth Model
  35. Ramsey-Friedman Optimality with Banking Time
  36. Optimal Fiscal Policy with Rationing in the Labor Market
  37. The Monetary Policy Committee's Reaction Function: An Exercise in Estimation
  38. Policy Effects in the Post Boom U.S. Economy
  39. Human Capital and Growth: An Alternative Accounting
  40. Growing Old Together: Firm Survival and Employee Turnover
  41. Vertical Diversity, Communication Gap and Equilibrium Growth
  42. Should Developing Countries Strengthen their Intellectual Property Rights?
  43. Capital Accumulation in Private Information Economies
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