Participation Dynamics: Sunspots and Cycles / Satyajit Chatterjee, Russell Cooper, B. Ravikumar.

Format:

Book

Author/Creator:

Chatterjee, Satyajit.

Contributor:

National Bureau of Economic Research.

Cooper, Russell.

Ravikumar, B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3438.

NBER working paper series no. w3438

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Participation Dynamics

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Summary:

This paper investigates the possibility of sunspots equilibria and endogenous cycles in an overlapping generations model with strategic interactions. We consider an economy with imperfectly competitive product markets. There is a participation decision on the part of prospective firms and a strategic complementarity emerges from the interaction of firms in their entry decisions both over time and across sectors. When these complementarities are sufficiently strong, multiple steady state equilibria will exist. Sunspot equilibria can then be constructed as randomizations in the neighborhood of these steady states. We relate the properties of our sunspot equilibria to aggregate fluctuations, with particular emphasis on the dynamics of entry and exit. We also show that if intratemporal strategic interactions are sufficiently strong, then cycles may exist. Additional sunspot equilibria can be found in the neighborhood of these cycles. Finally, we show that if inter temporal linkages are sufficiently strong, cycles will not exist.

Notes:

Print version record

September 1990.