Models with externalities have become increasingly popular for studying both long-term growth and business cycle fluctuations. Externalities can lead to indeterminacy, allowing self-fulfilling expectations to determine the equilibrium. This paper argues that the importance of indeterminacy might...

We study a class of two-sector growth models with sector-specific externalities, in which one sector produces consumption and the other sector produces investment. The novelty is that investment allocated to the consumption sector is an imperfect substitute for investment allocated to the...