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Animal spirits in cash-in-advance economies*

Published online by Cambridge University Press:  17 August 2016

Stefano Bosi ,
Frédéric Dufourt  and
Francesco Magris
Stefano Bosi*
Affiliation:
EPEE, University of Evry
Frédéric Dufourt
Affiliation:
BETA-theme, University Louis Pasteur
Francesco Magris
Affiliation:
EPEE, University of Evry
*
†EPEE, Département d'économie, Université d'Evry - Val d'Essonne. 4, Bd F. Mitterrand. 91025 Evry Cedex, France. Tel: + 33 1 69 47 70 52. Fax: + 33 1 69 47 70 50. E-mail: stefano.bosi@univ-evry.fr.
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Summary

The possibility of indeterminacy and sunspot fluctuations in dynamicrational expectations models has been often questioned on empirical grounds,for such models are widely believed to rely on implausibly high degrees ofincreasing returns to scale and/or other controversial calibrations ofeconomic fundamentals. In this paper, we study the occurrence of suchphenomena in a standard (one-sector) optimal growth model with endogenouslabor supply and a partial cash-in-advance constraint on consumptionpurchases. We show that, under standard preferences and constant returns toscale in production, indeterminacy typically prevails for an arbitrarilysmall amplitude of the liquidity constraint. We also analyze the cyclicalproperties of the model submitted to technological and beliefs disturbancesand observe that it performs as well as comparable indeterminate models inthe literature.

Résumé

Résumé

La pertinence empirique des modèles avec indétermination de l'équilibre etfluctuations “à taches solaires” a souvent été remise en cause, notammentparce que de tels modèles exigeraient des rendements d'échelle fortementcroissants ou des calibrations relativement controversées des fondamentauxde l'économie. Dans cet article, nous étudions l'apparition de telsphénomènes dans un modèle standard de croissance optimale avec offre detravail endogène lorsqu'une contrainte d'encaisses préalables partielleporte sur les dépenses de consommation des ménages. Nous montrons, sous despréférences usuelles et des rendements d'échelle constants, que de telsphénomènes émergent en présence d'une contrainte de liquidité arbitrairementfaible. Nous étudions également les propriétés cycliques de cette économieen présence de chocs portant simultanément sur la technologie et lescroyances, et analysons nos résultats au regard de modèles comparablesproposés dans la littérature.

Keywords

Cash-in-advanceindeterminacybusiness cyclesD90E32E41encaisses préalablesindéterminationcycles économiquesD90E32E41

Information

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 73 , Issue 2 , 2007 , pp. 131 - 151
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2007 

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Footnotes

*

We are grateful to Guido Cazzavillan, Jean-Michel Grandmont, MarcoMaffezzoli and Alain Venditti for very helpful comments andsuggestions. We wish to thank participants to SET 2002 and ESEM 2002in Venice, T2M 2002 in Evry, and Journée DELTA. Any remaining errorsare our own.

References

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