Abstract
This paper establishes necessary and sufficient conditions for the existence of stationary cycles in an economy comprising independent investing firms. The economy is not subject to aggregate uncertainty, investors have no direct complementarities, and all agents act independently. The cycle arises due to general equilibrium contemporaneous complementarities between investors devoting resources to innovation which yields temporary profits. With numerical examples we show that there are multiple cyclical equilibria that differ in the cycle length. Welfare and the long-run growth rate can be increased from an equilibrium where innovations occur rapidly to one with longer cycles; however, there exists a finite cycle length that maximizes welfare.Journal of Economic LiteratureClassification Numbers: E32, L16, O31, O41.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
