Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy
Carine Nourry and
Alain Venditti
Working Papers from HAL
Abstract:
We consider a two-sector two-periods overlapping generations model with inelastic labor, consumption in both periods of life and homothetic CES preferences. Assuming gross substitutability and a capital intensive consumption good, we prove that when dynamic eciency holds, local indeterminacy and sunspot fluctuations occur with low enough values for the sectoral elasticities of capital-labor substitution and we illustrate this finding within a standard example. This result shows that some scale policy rules can prevent the existence of business-cycle fluctuations in the economy by driving it to the optimal steady state as soon as it is announced, and thus shows that Reichlin's [9] influential conclusion is a robust property in a two-sector OLG economy.
Keywords: Two-sector OLG model; dynamic efficiency; gross substitutability in consumption; local indeterminacy; stabilization policy (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00439240
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://shs.hal.science/halshs-00439240/document (application/pdf)
Related works:
Journal Article: Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy (2011)
Working Paper: Local indeterminacy under dynamic efficiency two-sector overlapping generations economy (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00439240
Access Statistics for this paper
More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).