Business cycles fluctuations in three-sector intertemporal equilibrium models

Kazuo Nishimura, Florian Pelgrin and Alain Venditti ()
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Kazuo Nishimura: Kobe University
Florian Pelgrin: EDHEC - EDHEC Business School - UCL - Université catholique de Lille
Alain Venditti: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper introduces a novel mechanism driving endogenous business cycle fluctuations within a frictionless three-sector intertemporal equilibrium model. We emphasize the critical role of consumer preferences as a primary driver of cyclical dynamics by considering a consumption bundle composed of a pure consumption good and a mixed consumption-investment good that simultaneously serves as both a final consumption good and a capital-accumulating investment good. Endogenous fluctuations naturally arise from sectoral capital intensity differences, an intertemporal consumption trade-off between the two goods, or the interaction of both mechanisms. We offer a detailed characterization of the economy's dynamics, identifying the Hopf bifurcation conditions that trigger persistent cyclical behavior. Additionally, we explore the periodicity of the resulting limit cycles, providing insights into how shifts in preferences and sectoral complementarities can generate self-sustained macroeconomic fluctuations.

Keywords: Three-sector intertemporal equilibrium growth models; Business cycles fluctuations; Hopf bifurcation; Endogenous cycle; Periodicity (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://hal.science/hal-05085177v1
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Published in Journal of Economic Theory, 2025, 226, pp.106010. ⟨10.1016/j.jet.2025.106010⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05085177

DOI: 10.1016/j.jet.2025.106010

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