Are Sunspots Necessary?

Stephen E Spear

Journal of Political Economy, 1989, vol. 97, issue 4, 965-73

Abstract: In this paper, the author shows the existence of stationary rational expectations equilibria in a simple, two-island, overlapping-generations model of the type first considered by Robert E. Lucas, Jr., in which all uncertainty is endogenous. The result is obtained by first constructing "sunspot" equilibria on each island separately and then using the equilibrium pricing equations to eliminate the sunspot variable. In the resulting equilibrium, each island's prices serve as the sunspot for the other island. The constructed equilibrium is nontrivially stochastic. Copyright 1989 by University of Chicago Press.

Date: 1989
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://dx.doi.org/10.1086/261636 full text (application/pdf)
Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JPE for details.

Related works:
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:ucp:jpolec:v:97:y:1989:i:4:p:965-73

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().