Indeterminacy and Sunspots with Constant Returns

  • Jess BenhabibEmail author
  • Kazuo Nishimura


Recently there has been a renewed interest in the possibility of indeterminacy and sunspots, or alternatively put, in the existence of a continuum of equilibria that arises in dynamic economies with some market imperfections. Much of the research in this area has been concerned with the empirical plausibility of indeterminacy in markets with external effects or with monopolistic competition and which exhibit some degree of increasing returns. While the early results on indeterminacy relied on relatively large increasing returns and high markups, more recently Benhabib and Farmer (1996a) showed that indeterminacy can also occur in two-sector models with small sector-specific external effects and very mild increasing returns.


External Effect Constant Return Investment Good Technology Shock Labor Supply Elasticity 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Department of EconomicsNew York UniversityNew YorkUSA
  2. 2.Institute of Economic ResearchKyoto UniversityKyotoJapan

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