This paper develops an example in which persistent deterministic business cycles appear in a purely endogenous fashion under fal.,).,~e~ oaÂ.Jte. These cycles are not attributable to exogenous 11 shocks 11 nor to any variation of policy since there are none in the model. Markets clear in the Walrasian sense at every date, and traders have perfect foresight along the cycles. The origin of these cycles is the potential conflict between the wealth effect and the intertemporal substitution effect that are associated to real interest rate movements. Business cycles appear in particular when the degree of concavity of a trader's utility function is sufficiently higher for old agents than for younger ones. The techniques
This paper develops an example in which persistent deterministic business cycles appear in a purely endogenous fashion under fal.,).,~e~ oaÂ.Jte. These cycles are not attributable to exogenous 11 shocks 11 nor to any variation of policy since there are none in the model. Markets clear in the Walrasian sense at every date, and traders have perfect foresight along the cycles. The origin of these cycles is the potential conflict between the wealth effect and the intertemporal substitution effect that are associated to real interest rate movements. Business cycles appear in particular when the degree of concavity of a trader's utility function is sufficiently higher for old agents than for younger ones. The techniques
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