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2017 | OriginalPaper | Buchkapitel

6. Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities

verfasst von : Takashi Kamihigashi

Erschienen in: Sunspots and Non-Linear Dynamics

Verlag: Springer International Publishing

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Abstract

This paper shows that regime-switching sunspot equilibria easily arise in a one-sector growth model with aggregate decreasing returns and arbitrarily small externalities. We construct a regime-switching sunspot equilibrium under the assumption that the utility function of consumption is linear. We also construct a stochastic optimal growth model whose optimal process turns out to be a regime-switching sunspot equilibrium of the original economy under the assumption that there is no capital externality. We illustrate our results with numerical examples.

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See Benhabib and Farmer (1999) for a survey of earlier results. See Grandmont (1989, 1991) for a discussion of the relations between the local stability properties of a steady state and the possibility of sunspot equilibria.

See Clain-Chamosset-Yvrard and Kamihigashi (2015) for an example of a regime-switching sunspot equilibrium in a two-country model with asset bubbles.

Kamihigashi (2015) shows that multiple steady states are possible even without externalities.

In the decentralized version of the model, profits are given to consumers, who are the owners of the firms.

The condition \(\sigma \in [0,1]\) is needed here.

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Titel: Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities
verfasst von: Takashi Kamihigashi
Verlag: Springer International Publishing
Buch: Sunspots and Non-Linear Dynamics
Print ISBN: 978-3-319-44074-3

Electronic ISBN: 978-3-319-44076-7

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-3-319-44076-7_6