Factors substitutability, heterogeneity and endogenous fluctuations in a finance constrained economy
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This paper examines the local properties of perfect foresight equilibrium of a finance constrained economy featuring two classes of infinitely-lived agents with heterogeneous general preferences. It is primarily concerned with the conceivability of endogenous fluctuations for large plausible capital-labor elasticities of substitution. It is notably shown that heterogeneity in preferences allows Hopf cycles to be entirely consistent with a wide range of elasticities of substitution including the unitary one (Cobb-Douglas specifications).
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