Business Cycle Models with Indeterminacy

1 Introduction.- 1.1 Introduction.- 1.2 New methods of business cycle theory.- 1.2.1 Building blocks of new classical macroeconomics.- 1.2.2 Real Business Cycle theory.- 1.2.3 The quantitative method.- 1.3 Business cycle models with indeterminacy.- 1.3.1 Animal Spirits.- 1.3.2 Applying the new classical macroeconomics’ methodology.- 1.3.3 Equilibrium solutions of linear rational expectations models: an informal discussion.- 1.3.4 An example of an artificial economy which can produce sunspots.- 1.3.5 The modelling of beliefs.- 1.3.6 Empirical evidence.- 1.3.7 Welfare and stabilization policy.- 1.4 Related work.- 1.4.1 One-sector models.- 1.4.2 Two-sector models.- 1.4.3 Indeterminacy in models of economic growth.- 1.5 Overview of dissertation.- 1.5.1 Chapter 2: Indeterminacy, business cycles and modest increasing returns to scale.- 1.5.2 Chapter 3: Self-fulfilling prophecies and economic fluctuations in a two-sectoral growth model.- 1.5.3 Chapter 4: Animal spirits, technology shocks and the business cycle.- 1.5.4 Conclusion.- 1.6 Appendix.- 1.6.1 The equilibrium solutions of linear rational expectations models: a formal discussion.- 2 Indeterminacy, Business Cycles and Modest Increasing Returns to Scale.- 2.1 Introduction.- 2.2 The model.- 2.2.1 The household.- 2.2.2 The firms.- 2.2.3 Returning to the households.- 2.3 The equilibrium dynamics.- 2.3.1 The steady state.- 2.3.2 The solution mechanism.- 2.4 Calibration.- 2.5 Results.- 2.5.1 Eigenvalues.- 2.6 Interpretation.- 2.7 Second moments.- 2.7.1 Population moments.- 2.7.2 Model moments.- 2.7.3 Model moments: results.- 2.7.4 The standard Real Business Cycle model.- 2.8 Conclusion.- 2.9 Appendix.- 2.9.1 The measure of returns to scale.- 2.9.2 The linearized version of the economy.- 3 Self-Fulfilling Prophecies and Business Cycles in a Two-Sector Stochastic Optimal Growth Model.- 3.1 Introduction.- 3.2 The model.- 3.2.1 The household.- 3.2.2 The firms.- 3.2.3 The equilibrium number of firms.- 3.2.4 The factor markets.- 3.3 The equilibrium dynamics.- 3.4 Calibration.- 3.4.1 Parameter calibration.- 3.4.2 Steady state calibration.- 3.5 Results.- 3.5.1 The model’s qualitative dynamics.- 3.5.2 The model’s quantitative dynamics.- 3.5.3 Comparing three models of the cycle.- 3.6 Conclusion.- 3.7 Appendix.- 3.7.1 Time Series.- 3.7.2 The loglinearized system.- 4 Animal Spirits, Technology Shocks and the Business Cycle.- 4.1 Introduction.- 4.2 The model.- 4.2.1 The household.- 4.2.2 The firms.- 4.2.3 The consumption goods sector.- 4.2.4 The investment goods sector.- 4.2.5 Factor markets in symmetric equilibrium.- 4.3 The equilibrium dynamics.- 4.3.1 The steady state of the economy.- 4.3.2 The solution mechanism.- 4.4 Calibration.- 4.5 Results.- 4.5.1 Eigenvalues.- 4.5.2 The economic intuition behind the results.- 4.6 Business cycle properties.- 4.6.1 Population moments.- 4.6.2 Model moments.- 4.7 Conclusion.- 4.8 Appendix.- 4.8.1 The Hodrick-Prescott filter.- 4.8.2 The approximated version of the economy.- 5 Conclusion.- 6 Bibliography.