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Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities

Takashi Kamihigashi

Chapter Chapter 6 in Sunspots and Non-Linear Dynamics, 2017, pp 125-146 from Springer

Abstract: Abstract This paper shows that regime-switching sunspot equilibria easily arise in a one-sector growth model with aggregate decreasing returns and arbitrarily small externalities. We construct a regime-switching sunspot equilibrium under the assumption that the utility function of consumption is linear. We also construct a stochastic optimal growth model whose optimal process turns out to be a regime-switching sunspot equilibrium of the original economy under the assumption that there is no capital externality. We illustrate our results with numerical examples.

Keywords: Labor Supply; Capital Stock; Transversality Condition; Bellman Equation; Consumption Function (search for similar items in EconPapers)
Date: 2017
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Working Paper: Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities (2016) Downloads
Working Paper: Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:spr:steccp:978-3-319-44076-7_6

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DOI: 10.1007/978-3-319-44076-7_6

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