In this paper, is show how procyclical capital flows originate boom-bust and sunspot episodes in a neoclassical growth model of a small, open economy. All markets are perfect, with the exception of the fact that some upper, endogenous limit is imposed on how much the economy can borrow from...

Economies with oligopolistic markets are prone to inefficient sunspot fluctuations triggered by autonomous changes in firms equilibrium conjectures. We show that a well designed taxation-subsidization scheme can eliminate these fluctuations by coordinating firms in each sector on a single...

We investigate the role of preferences in the existence of expectation-driven instability under a balanced budget rule where government spendings are financed by a tax on labor income. Considering a one-sector neoclassical growth model with a large class of preferences, we find that...

We introduce public spending, financed through income taxation, in the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles...

We explore the existence of endogenous fluctuations with a rational bubble and the stabilizing role of fiscal and monetary policies. Consumers' credit constraints, the role of collateral and a portfolio choice are the key ingredients of our analysis. We consider an overlapping generations model...

We examine the impact of balanced-budget consumption taxes on the existence of expectations-driven business cycles in two-sector economies with infinitely-lived households. We prove that, whatever the relative capital intensity difference across sectors, aggregate instability can occur if the...