Capital-labor substitution and competitive nonlinear endogenous business cycles

Jean-Michel Grandmont (), Patrick Pintus and Robin de VILDER
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Robin de VILDER: University of Amsterdam, Department of Mathematics

No 1997087, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We develop in this paper simple geometrical methods to study local indeterminacy, bifurcations and stochastic (sunspot) equilibria near a steady state, in nonlinear two dimensional economic models. We present stochastic sunspot equilibria, which allows a constructive description of local bifurcations. The latter analysis is relevant when some eigenvalues of the linearized dynamics, near the steady state, have a modulus close to one (“unit root(s)”), as taking into account small nonlinearities generates linear local approximation. These methods are applied to a simple aggregative model (Woodford (JET, 1986)), to study in particular the influence of capital-labor substitution and of the aggregate labor supply wage elasticiy, on the occurrence of competitive endogenous deterministic or stochastic fluctuations.

Keywords: Endogenous business cycles; sunspots; indeterminacy of equilibrium; nonlinear dynamics; bifurcations; unit roots (search for similar items in EconPapers)
JEL-codes: C62 E32 (search for similar items in EconPapers)
Date: 1997-11-01
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles (1998)
Working Paper: Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1997087

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