skip to content

Faculty of Economics

Journal Cover

Anagnostopoulos, A. and Giannitsarou, C.

Indeterminacy and period length under balanced budget rules

Macroeconomic Dynamics

Vol. 17(1) pp. 898-919 (2012)

Abstract: We analyze the importance of the frequency of decision making for macroeconomic dynamics, in the context of a simple, well-known business cycle model with balanced budget rules. We explain how the frequency of decision making (period length) and the measurement unit of time (calibration frequency) differ and examine how local stability is affected by changes in the period length. We find that as the period grows longer, indeterminacy occurs less often. This may have significant quantitative implications: for the model at hand, there is a wide range of economically relevant labor tax rates (from 30% to 38%) for which the continuous-time model gives indeterminacy, whereas the discrete-time model has determinate dynamics.

JEL Codes: C62, E22, O41

Author links: Chryssi Giannitsarou  

Publisher's Link: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8501562&fulltextType=RA&fileId=S1365100511000745



Papers and Publications



Recent Publications


Ambrus, A. and Elliott, M. Investments in Social Ties, Risk Sharing, and Inequality Review of Economic Studies [2020]

Carvalho, V. M. and Grassi, B. Large Firm Dynamics and the Business Cycle American Economic Review [2019]

Agranov, M. and Elliott, M. Commitment and (in) Efficiency: A Bargaining Experiment Journal of the European Economic Association [2020]

Cavalcanti, T. and Santos, M. (Mis)Allocation Effects of an Overpaid Public Sector Journal of the European Economic Association [2020]