Equilibrium Cycles in a Two-Sector Economy with Sector Specific Externality

Miki Matsuo, Kazuo Nishimura, Tomoya Sakagami and Alain Venditti
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Miki Matsuo: Kyoto University
Tomoya Sakagami: Kumamoto Gakuen University - Gakuen University

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Abstract: In this paper, we study the two-sector CES economy with sector-specific externality (feedback effects) following Nishimura and Venditti \(2004). We characterize the equilibrium paths in the case that allows negative externality. That equilibrium paths were not explicitly discussed by Nishimura and Venditti and show how the degree of externality may generate equilibrium cycles around the steady state.

Keywords: Two-sector economy; sector-specific externalities; indeterminacy; period-two cycles; capital-labor substitution (search for similar items in EconPapers)
Date: 2008-05-26
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