Market distortions and local indeterminacy: a general approach
Teresa Lloyd-Braga (),
Leonor Modesto () and
Thomas Seegmuller ()
Working Papers from HAL
We provide a methodology to study the role of market distortions on the emergence of indeterminacy and bifurcations. Most of the specific market imperfections considered in the related literature are particular cases of our framework. Comparing them we obtain several equivalence results in terms of local dynamic properties, highlighting the main chanels and classes of distortions responsible for indeterminacy. Our methodolgy consists in introducing general specifications for the elasticities of the crucial functions defining the aggregate equilibrium dynamics of the model. This allows us to study how market distortions influence the range of values for the elasticity of inputs substitution under which local indeterminacy and bifurcations occur. Applying this methodology to the Woodford (1986) framework we find that distortions in the capital market, per se, do not play a major role. We further show that, for empirically plausible values of elasticity of substitution between inputs, indeterminacy requires a minimal degree of distortions. This degree seems to be high under output market distortions, while with labor market distortions the required degree is empirically plausible.
Keywords: Indeterminacy; endogenous fluctuations; market imperfections; externalities; imperfect competition; taxation (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00576582
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: Market distortions and local indeterminacy: A general approach (2014)
Working Paper: Market distortions and local indeterminacy: A general approach (2014)
Working Paper: Market Distortions and Local Indeterminacy: A General Approach (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00576582
Access Statistics for this paper
More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().