Citation

Discussion Paper Details

Please find the details for DP1403 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Indeterminacy and Sector-specific Externalities

Author(s): Jess Benhabib and Roger E A Farmer

Publication Date: May 1996

Keyword(s): Business Fluctuations, Indeterminacy and Sunspots

Programme Area(s): International Macroeconomics

Abstract: We introduce mild increasing returns to scale into a version of the Real Business Cycle model. These increasing returns to scale occur as a consequence of sector-specific externalities, that is, externalities where the output of the consumption and investment sectors have external effects on the output of firms within their own sector. Keeping the production technologies for both sectors identical, for expositional simplicity, we show that indeterminacy can easily occur for parameter values typically used in the real business cycle literature, and in contrast to some earlier literature on indeterminacies, for externalities mild enough so that labour demand curves are downward sloping.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1403

Bibliographic Reference

Benhabib, J and Farmer, R. 1996. 'Indeterminacy and Sector-specific Externalities'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1403