SUNSPOT FLUCTUATIONS AROUND A STEADY-STATE - THE CASE OF MULTIDIMENSIONAL, ONE-STEP FORWARD LOOKING ECONOMIC-MODELS

The paper investigates the existence of stationary sunspot equilibria (SSE) in the vicinity of a steady state in a general, one-step forward looking economic model of dimension n. It is shown that, whenever the steady state is indeterminate, for the associated deterministic dynamics-i.e., there exists a continuum of perfect foresight paths converging to the steady state-then there exists a continuum of SSE of finite order in any neighborhood of the steady state. The proof relies upon bifurcation theory; it provides a characterization of the random processes for which SSE may appear and a description of the location of the support of the SSE close to the bifurcation. The results apply in particular to linear models.