Chaos , Sunspots and Automatic Stabilizers

  title={Chaos , Sunspots and Automatic Stabilizers},
  author={Lawrence J. Christiano},
We consider a real business cycle model with an externality in production. Depending on parameter values, the model has sunspot equilibria, cyclical and chaotic equilibria, and equilibria with deterministic or stochastic regime switching. We study the implications of this model environment for automatic stabilizer tax systems. Stabilization is desirable because the e¢cient allocations are characterized by constant employment and output growth. We identify an automatic stabilizer income tax… CONTINUE READING
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