Sunspot fluctuations in two-sector models: New results with additively separable preferences

Frédéric Dufourt (1) , Kazuo Nishimura (2, 3) , Alain Venditti (4, 1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 KIER, Kyoto University
3 RIEB, Kobe University
4 Edhec Business School - Edhec

We analyze local indeterminacy and sunspot-driven fluctuations in the standard two-sector model with additively separable preferences. We provide a detailed theoretical analysis enabling us to derive relevant bifurcation loci and to characterize the steady-state local stability properties as a function of various structural parameters influencing the degree of increasing returns to scale, the amount of intertemporal substitution in consumption, and the elasticity of the aggregate labor supply curve. On the theoretical side, we prove the existence of both a flip and a Hopf bifurcation locus in the corresponding parameter space. We also show that local indeterminacy can be obtained under any labor supply elasticity or under an arbitrarily low elasticity of intertemporal substitution in consumption. On the empirical side, we find that indeterminacy and sunspot fluctuations are robust features of two-sector models, prevailing for most empirically plausible calibrations for these parameters. (This abstract was borrowed from another version of this item.)

Mots clés: ndeterminacy; sunspots; two-sector model; sector-specific externalities; real business cycles

Domaines: Sciences de l'Homme et Société; Economies et finances

Frédéric Dufourt, Kazuo Nishimura, Alain Venditti. Sunspot fluctuations in two-sector models: New results with additively separable preferences. 2023. ⟨hal-01447848⟩