TY  - JOUR
AU  - Chatterjee,Satyajit
AU  - Cooper,Russell
AU  - Ravikumar,B. 
TI  - Participation Dynamics:  Sunspots and Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3438
PY  - 1993
Y2  - December 1993
UR  - http://www.nber.org/papers/w3438
L1  - http://www.nber.org/papers/w3438.pdf
N1  - Author contact info:
Satyajit Chatterjee
Research Department
Federal Reserve Bank
10 Independence Mall
Philadelphia, PA  19106
E-Mail: chatterjee.satyajit@gmail.com

Russell Cooper
Department of Economics
European University Institute
via della Piazzola, 43
Firenze, 50133
ITALY
E-Mail: russellcoop@gmail.com

B. Ravikumar
Department of Economics
University of Iowa
Pappajohn Business Bldg.
Iowa City, IA 52242
Tel: 319/335-3810
Fax: 319/335-1956
E-Mail: B.Ravikumar@stls.frb. org
AB  - This paper investigates the possibility of sunspots equilibria and endogenous cycles in an overlapping generations model with strategic interactions. We consider an economy with imperfectly competitive product markets. There is a participation decision on the part of prospective firms and a strategic complementarity emerges from the interaction of firms in their entry decisions both over time and across sectors. When these complementarities are sufficiently strong, multiple steady state equilibria will exist. Sunspot equilibria can then be constructed as randomizations in the neighborhood of these steady states. We relate the properties of our sunspot equilibria to aggregate fluctuations, with particular emphasis on the dynamics of entry and exit. We also show that if intratemporal strategic interactions are sufficiently strong, then cycles may exist. Additional sunspot equilibria can be found in the neighborhood of these cycles. Finally, we show that if inter temporal linkages are sufficiently strong, cycles will not exist.
ER  -