Local Sunspot Equilibria Reconsidered

Julio Dávila, Piero Gottardi and Atsushi Kajii

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We generalize the usual notion of local sunspot equilibria. We say such equilibria exist around a steady state of an OLG economy whenever stationary sunspot equilibria of arbitrarily close economies exist within any neighborhood of the steady state. Unlike the usual notion, this generalization allows to address the following identification problem: Can an analyst distinguish empirically small fluctuations due to small shocks to the fundamentals from pure expectations-driven fluctuations? We study conditions under which these generalized local sunspot equilibria exist in OLG economies, and show that they may exist around not only indeterminate but also determinate steady states.

Keywords: sunspots; indeterminacy; overlapping generations (search for similar items in EconPapers)
Date: 2007
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Published in Economic Theory, 2007, 31 (3), pp.401-425. ⟨10.1007/s00199-006-0108-4⟩

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Related works:
Journal Article: Local Sunspot Equilibria Reconsidered (2007)
Working Paper: Local Sunspot Equilibria Reconsidered (2007)
Working Paper: Local Sunspot Equilibria Reconsidered (2007)
Working Paper: Local Sunspot Equilibria Reconsidered
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00286023

DOI: 10.1007/s00199-006-0108-4

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