Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?

Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?

We study a standard two-period economy with one nominal bond and one firm. The firm finances the input with the nominal bond in the first period and its profits are distributed to the shareholders in the second period. We show that in the neighbourhood of each efficient equilibrium, a sunspot equili...

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Main Author: KAJII, Atsushi
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2009
Subjects:
economic theory
interest rate
modeling
stock market
Economic Theory
Online Access:https://ink.library.smu.edu.sg/soe_research/1855
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Institution: Singapore Management University
Language: English
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spelling sg-smu-ink.soe_research-28542016-06-21T06:18:04Z Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction? KAJII, Atsushi We study a standard two-period economy with one nominal bond and one firm. The firm finances the input with the nominal bond in the first period and its profits are distributed to the shareholders in the second period. We show that in the neighbourhood of each efficient equilibrium, a sunspot equilibrium also exists. It is shown that the equilibrium interest rate is lower than the efficient level and that there is overproduction in the sunspot equilibrium, under some conditions. However, there is no sunspot equilibrium if the profit share of the firm can be traded as well as the bond. 2009-03-01T08:00:00Z text https://ink.library.smu.edu.sg/soe_research/1855 info:doi/10.1111/j.1468-5876.2008.00469.x Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University economic theory interest rate modeling stock market Economic Theory
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic economic theory
interest rate
modeling
stock market
Economic Theory
spellingShingle economic theory
interest rate
modeling
stock market
Economic Theory
KAJII, Atsushi
Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
description We study a standard two-period economy with one nominal bond and one firm. The firm finances the input with the nominal bond in the first period and its profits are distributed to the shareholders in the second period. We show that in the neighbourhood of each efficient equilibrium, a sunspot equilibrium also exists. It is shown that the equilibrium interest rate is lower than the efficient level and that there is overproduction in the sunspot equilibrium, under some conditions. However, there is no sunspot equilibrium if the profit share of the firm can be traded as well as the bond.
format text
author KAJII, Atsushi
author_facet KAJII, Atsushi
author_sort KAJII, Atsushi
title Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
title_short Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
title_full Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
title_fullStr Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
title_full_unstemmed Sunspot equilibria in a production economy: Do rational animal spirits cause overproduction?
title_sort sunspot equilibria in a production economy: do rational animal spirits cause overproduction?
publisher Institutional Knowledge at Singapore Management University
publishDate 2009
url https://ink.library.smu.edu.sg/soe_research/1855
_version_ 1770572982457991168

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