Economics at your fingertips  

Indeterminacy and sunspots in macroeconomics

Jess Benhabib () and Roger Farmer ()

Chapter 06 in Handbook of Macroeconomics, 1999, vol. 1, Part A, pp 387-448 from Elsevier

Abstract: This chapter gives an overview of the recent literature on indeterminacy and sunspots in macroeconomics. It discusses of some of the conceptual and the technical aspects of this literature, and provides a simple framework for illustrating the mechanisms of various dynamic equilibrium models that give rise to indeterminate equilibria. The role of external effects, monopolistic competition, and increasing returns in generating indeterminacy is explored for one-sector and multi-sector models of real business cycles and of economic growth. Indeterminacy is also studied in monetary models, as well as in models where monetary and fiscal policy are endogenous and determined by feedback rules. Particular attention is paid to the empirical plausibility of these models and their parametrizations in generating indeterminate equilibria. An overview of calibrated macroeconomic models with sunspot equilibria is given, and their successes and shortcomings in matching properties of data are assessed. Finally some issues regarding the selection of equilibria, the observable implications, and difficulties of forecasting that arise in such models are briefly addressed.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (243) Track citations by RSS feed

Downloads: (external link) ... 82e36d7debef1d6b12d3
Full text for ScienceDirect subscribers only

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:

Access Statistics for this chapter

More chapters in Handbook of Macroeconomics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-07-22
Handle: RePEc:eee:macchp:1-06