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Product Scope and Endogenous Fluctuations

Author

Listed:
  • Oscar Pavlov

    (University of Tasmania)

  • Mark Weder

    (University of Adelaide)

Abstract
Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. It shows that the multi-product nature of firms makes the economy susceptible to sunspot equilibria. The model is estimated via Bayesian methods. Artificial business cycles closely resemble empirically observed fluctuations with sunspots explaining a significant portion of U.S. business cycles. (Copyright: Elsevier)

Suggested Citation

  • Oscar Pavlov & Mark Weder, 2017. "Product Scope and Endogenous Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 175-191, March.
    • Handle: RePEc:red:issued:15-129
    DOI: 10.1016/j.red.2017.01.006
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stephen McKnight & Laura Povoledo, 2022. "Endogenous fluctuations and international business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 312-348, February.
    2. Wei Dai & Mark Weder & Bo Zhang, 2020. "Animal Spirits, Financial Markets, and Aggregate Instability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 2053-2083, December.
    3. King Yoong Lim & Diego Morris, 2023. "Firm‐level impact of the global financial crisis: Evidence on innovation from Latin America," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3902-3917, October.
    4. Pavlov, Oscar, 2021. "Multi-product firms and increasing marginal costs," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    5. Qazi Haque & Oscar Pavlov & Mark Weder, 2024. "Superstar Firms and Aggregate Fluctuations," School of Economics and Public Policy Working Papers 2024-01 Classification-E3, University of Adelaide, School of Economics and Public Policy.
    6. Pavlov, Oscar & Weder, Mark, 2022. "Endogenous product scope: Market interlacing and aggregate business cycle dynamics," European Economic Review, Elsevier, vol. 148(C).
    7. Xue, Jianpo & Yip, Chong K., 2018. "Home production, balanced-budget taxation and economic (in)stability," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 231-242.
    8. Liu, Taoxiong & Liu, Zhuohao, 2022. "A growth model with endogenous technological revolutions and cycles," Journal of Mathematical Economics, Elsevier, vol. 103(C).

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    More about this item

    Keywords

    Indeterminacy; sunspot equilibria; multi-product firms; business cycles; Bayesian estimation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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