Equilibrium Cycles in a Two-Sector Economy with Sector Specific Externality
Author
Matsuo, Miki
Nishimura, Kazuo
Sakagami, Tomoya
Venditti, Alain
Abstract
In this paper, we study the two-sector CES economy with sector-specific externality (feedback effects). We characterize the equilibrium paths in the case that allows negative externality, and show how the degree of externality may generate equilibrium cycles around the steady state.