A Note on Sunspots with Heterogeneous Agents

23 Pages Posted: 24 Apr 2010 Last revised: 28 Aug 2010

See all articles by Daniel Carroll

Daniel Carroll

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Eric R. Young

University of Virginia

Date Written: July 15, 2009

Abstract

This paper studies sunspot fluctuations in a model with heterogeneous households. We find that wealth inequality reduces the degree of increasing returns needed to produce indeterminacy, while wage inequality increases it. When the model is calibrated to match the joint distribution of hours, income, and wealth, the required degree of increasing returns to scale is still much too high to be supported empirically (although smaller than similar homogeneous agent economies). We also find that the model robustly predicts only one sunspot, despite having 1,262 predetermined state variables.

Keywords: Heterogeneity, Sunspots

JEL Classification: E21, E25, E62

Suggested Citation

Carroll, Daniel and Young, Eric R., A Note on Sunspots with Heterogeneous Agents (July 15, 2009). FRB of Cleveland Working Paper No. 09-06, Available at SSRN: https://ssrn.com/abstract=1595059

Daniel Carroll (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Eric R. Young

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
27
Abstract Views
408
PlumX Metrics