A popular theory of business cycles is that they are driven by animal spirits: shifts in expectations brought on by sunspots. Two prominent examples are Diamond (JPE, 1982) and Howitt and McAfee (AER, 1992). We show that these models have unique equilibria if there are payoff shocks of any size....

The purpose of this paper is to study the influence of the elasticity of capital-labour substitution and of the labour supply elasticity on the existence of multiple Pareto-ranked stationary eqilibria, local indeterminacy, bifurcations and expectations driven fluctuations in economies with...

In discrete three-dimensional dynamical systems frequently encountered in dynamic general equilibrium models, local indeterminacy -sunspot equilibria - and local bifurcations -endogenous deterministic fluctuations - issues are quite difficult to handle. Pitfalls derive from the fact that in...