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Self-Fulfilling Expectations and Fluctuations in Aggregate Demand / Michael Woodford.
- Format:
- Book
- Author/Creator:
- Woodford, Michael.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3361.
- NBER working paper series no. w3361
- Language:
- English
- Subjects (All):
- Business cycles--Mathematical models.
- Business cycles.
- Equilibrium (Economics)--Mathematical models.
- Equilibrium (Economics).
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1990.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1990.
- Summary:
- The paper presents an intertemporal general equilibrium model with rationing in the product market, in which stationary sunspot equilibria are shown to exist, indicating the possibility of fluctuations in economic activity simply due to self-fulfilling variations in economic agents' expectations. Specifically, revised expectations about future aggregate demand change current investment demand, which (amplified by a multiplier" process) then affects current aggregate demand. Parameter values required for endogenous fluctuations are discussed, as well as quantitative properties of the fluctuations predicted. Countercyclical stabilization policies are shown to rule out such equilibria.
- Notes:
- Print version record
- May 1990.
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