within the framework of this paper constitute deviations from a long run trend
and argues that government intervention can be welfare improving. Moreover,
the paper quantifies the intangible notions of overheating, overborrowing, and
output gap.
In summary, the paper gives an example of an equilibrium route towards
endogenous fluctuations in aggregate demand. The fluctuations are the result
of equilibrium actions taken by rational utility maximizing agents.
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and Macro-Economic Stability," Quarterly Journal of Economics Vol 114
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[3] Barlevy, Gady (1998), “Learning Costs and Delayed Adjustment,” North-
western University mimeo.
[4] Blanchard, Olivier-Jean (1993), “Consumption and the Recession of 1990-
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[5] Blanchard, Olivier-Jean, and Nobuhiro Kiyotaki (1987), “Monopolistic
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[6] Blanchard, Olivier-Jean (1977), “Essays on Fluctuations,” MIT, Ph.D.,
Thesis 1977.
[7] Brock, William A., and Cars H. Hommes (1997), “A Rational Route to
Randomness,” Econometrica, Vol. 65, No 5, pp. 1059-1095.
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of Specificity,” JournalofPoliticalEconomy, 106(4), Augusts 1998, pp. 724-
767.
[9] Chiarella, C. (1988), "The Cobweb Model, its Instability and the Onset of
Chaos," Economic Modelling 5, pp. 377-384.
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33
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