It is well known that if mild sector specific externalities are considered, then the steady state of the standard two-sector real business cycle model can become locally indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard...

This paper explores the local stability properties of the steady state in the twosector neoclassical growth model with sector specific externalities. We show analytically that capital adjustment costs of any size preclude local indeterminacy nearby the steady state for every empirically...

This paper studies the determinacy of equilibrium in a version of the neoclassical growth model in which different sectors produce consumption and capital goods. The capital sector is subject to sector-specific externalities and adjustment costs: capital is sector specific and it is costly to...