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

Stefano Bosi () and Francesco Magris
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Stefano Bosi: Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium

No 1997069, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

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.

Keywords: bifurcations; sunspots; endogenous fluctuations (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 1997-09-01
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