INDETERMINACY, DYNAMIC ADJUSTMENT COSTS, AND CYCLES

Recent work suggests that the standard real-business-cycle framework p ossesses multiple equilibria (indeterminacy) and dampened oscillations in the presence of externalities. This paper reports that empirically plausible costs of adjustment make indeterminacy disappear easily whi le the oscillation mechanism is, however, perfectly preserved. (C) 199 8 Elsevier Science S.A.