Continuous-Time Sunspot Equilibria and Dynamics in a Model of Growth

Market distortions and local indeterminacy: A general approach

“…when ε γ crosses the critical value ε γ T . 15 When (T, D) crosses the line (AB), ε γ crossing the critical value ε γ F , a flip bifurcation generically occurs. When (T, D) crosses the segment [BC] in its interior, ε γ crossing the critical value ε γ H , a Hopf bifurcation generically occurs.…”

“…We further assume that D 1 (+∞) > −1. Using (15), we summarize these conditions as follows: 15 A saddle node or a pitchfork bifurcation may be also possible. The case of a saddle node bifurcation, in which the steady state under analysis disappears, is ruled out, since we apply our analysis to (K, L) = (1, 1) whose existence is persistent, under the usual scaling procedure.…”

“…al (2000). 59 The interested reader can refer to Dos Santos Ferreira and Dufourt (2006), Dos Santos Ferreira and Lloyd-Braga (2008) and Wang and Wen (2008) who exploit static indeterminacy of the equilibrium to explain expectation-driven fluctuations and to Drugeon and Wigniolle (1996) and Gali (1995) who obtain multiplicities from the analysis of global dynamics. using the methodology of Grandmont et al (1998).…”

Monetary Policy Instability in Nigeria:A Rational Expectation Approach

“…As a means of achieving this, asimple monetary model with rational expectationthat emphasizes the fiscal role of the real exchangerate is used.The fiscal role of real exchange rate is particularly relevant to Nigeria since the bulk of government revenue is derived from foreign exchange earnings. The model is derived from the sunspot equilibria theory in which Woodford (1986), and Drugeon and Wignolle (1996) have demonstrated that macroeconomic instability is related to multiple (a continuum of) rational expectation equilibria.In the theoretical model, thelinks between high inflation and the joint volatility of the real exchange rate and inflation rate, as well as some aspects of government's fiscal andexchange rate policies are illustrated in a rationalexpectation equilibrium framework. In this model,inflation rate and the real exchange ratesare jointly determined by the equilibrium of the model.…”

Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)

“…Consequently, inflation rate and the real exchange rates are jointly determined by the equilibrium of the model. This is derived from the sunspot equilibria theory in which Woodford (1986), Shigoka (1994) and Drugeon and Wignolle (1996) have demonstrated that macroeconomic instability is related to multiple rational expectation equilibria.…”