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Pré-publication, Document de travail Année : 2009

Local indeterminacy under dynamic efficiency two-sector overlapping generations economy

Résumé

We consider a two-sector two-periods overlapping generations model with inelastic labor, consumption in both periods of life and homothetic CES preferences. Assuming gross substitutability and a capital intensive consumption good, we prove that when dynamic efficiency holds, local indeterminacy and sunspot fluctuations occur with low enough values for the sectoral elasticities of capital-labor substitution and we illustrate this finding within a standard example. This result shows that some fiscal policy rules can prevent the existence of business-cycle fluctuations in the economy by driving it to the optimal steady state as soon as it is announced, and thus shows that Reichlin's [9] influential conclusion is a robust property in a two-sector OLG economy.
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Dates et versions

halshs-00432270, version 1 (15-11-2009)

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  • HAL Id : halshs-00432270 , version 1

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Carine Nourry, Alain Venditti. Local indeterminacy under dynamic efficiency two-sector overlapping generations economy. 2009. ⟨halshs-00432270⟩
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Dernière date de mise à jour le 28/04/2024
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