Equilibrium Cycles in a Two-Sector Economy with Sector Specific Externality

Miki Matsuo (1) , Kazuo Nishimura (1) , Tomoya Sakagami (2) , Alain Venditti (3)

1 Kyoto University
2 Kumamoto Gakuen University
3 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

In this paper, we study the two-sector CES economy with sector-specific externality (feedback effects) following Nishimura and Venditti \(2004). We characterize the equilibrium paths in the case that allows negative externality. That equilibrium paths were not explicitly discussed by Nishimura and Venditti and show how the degree of externality may generate equilibrium cycles around the steady state.

Mots clés: Two-sector economy; sector-specific externalities; indeterminacy; period-two cycles; capital-labor substitution

Domaines: Economies et finances

Miki Matsuo, Kazuo Nishimura, Tomoya Sakagami, Alain Venditti. Equilibrium Cycles in a Two-Sector Economy with Sector Specific Externality. 2008. ⟨halshs-00282089⟩