Indeterminacy and Endogenous Fluctuations With Arbitrarily Small Liquidity Constraint
Stefano Bosi () and
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Stefano Bosi: EPEE, University of Evry
No 01-09, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne
The empirical relevance of indeterminacy and sunspot fluctuations has been often questioned on the basis of the implausibly high degrees of increasing returns to scale or unconventional calibrations for the fundamentals required. In this paper we study a one-sector economy with partial cash-in-advance constraint on consumption expenditures and show how such phenomena are by contrast quite pervasive: In fact, their scope improves as soon as the liquidity constraint is set smaller and smaller and finally, for amplitudes of the liquidity constraint small enough, they are bound to prevail for whatever fundamentals specification.
Keywords: cash-in-advance; indeterminacy; endogenous fluctuations (search for similar items in EconPapers)
JEL-codes: D90 E32 E41 (search for similar items in EconPapers)
Pages: 23 pages
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Journal Article: Indeterminacy and endogenous fluctuations with arbitrarily small liquidity constraint (2003)
Working Paper: Indeterminacy and endogenous fluctuations with arbitrarily small liquidity constraint (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:eve:wpaper:01-09
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