Indeterminacy and Cycles in Two-Sector Discrete-Time Models

Jess Benhabib (), K. Nishimura and Alain Venditti ()

G.R.E.Q.A.M. from Universite Aix-Marseille III

Abstract: We consider a discrete-time two-sector Cobb-Douglas economy with positive sector specific external effects. We show that indetermincay of steady states and cycles can easily arise with constant or decreasing social returns to scale, and very small market imperfections. This is in sharp contrast with most of the contribution in the literature in which increasing social returns are required to generate indeterminacy.

Keywords: MATHEMATICAL ANALYSIS; BUSINESS CYCLES; ECONOMIC GROWTH (search for similar items in EconPapers)
JEL-codes: C62 E32 O41 (search for similar items in EconPapers)
Date: 1999
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