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The Indeterminate Fate of Sunspots in Economics

54 Pages Posted: 1 Nov 2015 Last revised: 1 May 2017

Beatrice Cherrier

CREM Université de Caen

Aurélien Saïdi

Université Paris Ouest - Nanterre, La Défense - EconomiX

Date Written: November 1, 2015


In this paper, we use archival sources, interviews and bibliometrics to trace the development of a loose community interested in indeterminacy and sunspots, and we propose several explanations for this indeterminate fate of their models. Sunspots were initially developed by Cass and Shell in reaction to some perceived inconsistencies they found in Lucas’s 1972 model. The idea that extrinsic beliefs matter in the context of indeterminacy was then spread by a set of researchers associated with the Center for Analytical Research in Economics and the Social Sciences (CARESS), at the University of Pennsylvania, and the Centre pour la Recherche Economique et ses Applications (CEPREMAP) in France, though by adopting distinct modeling strategies and vocabulary. By the mid-1980s, several theorists understood that they were interested in common topics – fluctuations, indeterminacy and coordination failures and attempted to draw connections between OLGs, general equilibrium, non-linear dynamics and game theory models. We explain how this convergence was counterbalanced by several fragmenting forces, and we outline several explanations for the marginalization of these models within economics: they were perceived by macroeconomists to be ultra-sophisticated limit cases devoid of practical relevance, they had no empirical dimension, and they were neglected by policy-makers, in particular central bankers. Finally, we quickly describe efforts by the second generation of sunspot theorists to correct these flaws by switching to RBC modeling and calibration, and provide a few hints on the current state of sunspot models.

Keywords: sunspot, indeterminacy, multiple equilibria, animal spirits, self-fulfilling prophecies

JEL Classification: B20, B22, B23, E10, E32

Suggested Citation

Cherrier, Beatrice and Saïdi, Aurélien, The Indeterminate Fate of Sunspots in Economics (November 1, 2015). Available at SSRN: or

Beatrice Cherrier (Contact Author)

CREM Université de Caen ( email )

Dpt Carrières Sociales, IUT
Pôle Universitaire Montfoulon
Damigny, 61250

Aurélien Saïdi

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000

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