Sunspots, cycles and adjustment costs in the two-sectors model

Jean-Philippe Garnier
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Jean-Philippe Garnier: EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé

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Abstract: Do adjustment costs able to modify the dynamic of the two sectors model? We examine the impact of adjustment costs in capital on the properties of long-run equilibrium. We propose to analyse how the positive and negative degrees of adjustment costs could interplay with the local indeterminacy mechanism coming from the presence of sector specific externalities. When the adjustments costs function is convex there exists a Höpf bifurcation and the trajectory describes a cycle around the steady state. We give an heuristic economic explanation of the role of the adjustment costs leading to economic cycles.}

Keywords: Two-sector growth model; externality; adjustment costs; endogenous fluctuations (search for similar items in EconPapers)
Date: 2012
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