This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a ip bifurcation occurs at a certain level...

This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a ip bifurcation occurs at a certain level...

We re-examine the destabilizing role of balanced-budget fiscal policy rules based on consumption taxation. Using a one-sector model with infinitely-lived households, and assuming that preferences are of the Greenwood-Hercovitz-Huffman [8] (GHH) type, we show that non-linear consumption taxation...

The standard new Keynesian monetary policy problem is presentable as a set of linearized equations, for values of endogenous variables relatively close to their steady-state. As a result, only three possibilities are admissible in terms of long-term dynamics: the equilibrium may be a stable...

Neoclassical growth models are essentially characterized by the formation of a steady state where the main economic aggregates (capital, output, consumption and investment) do not grow, unless some external event takes place (e.g., technological progress or population growth). Hence, the long...

We consider a multi-sector overlapping generations model with imperfectly competitive firms in the output markets and wage setting trade unions in the labour markets. A coordination problem between firms creates multiple temporary equilibria which are either Walrasian or of the Keynesian...