Existence and local indeterminacy of periodic equilibrium paths in infinite horizon models with external effects

Abstract

It is expected that every periodic equilibrium path may exist even under standard assumptions such as low discounting and the concavity of utility functions in infinite horizon models with external effects. Nevertheless, until now no such example has been presented. In this note we will first construct a bounded growth model that has an external effect and every periodic equilibrium path under any discount factor. Next we will study the conditions under which periodic equilibrium paths have a local indeterminacy.External effects, Periodic equilibrium paths, Local indeterminacy.