Production Structure and Multiple Equilibria - A DSGE Perspective

This paper integrates the Austrian school’s production structure theory and financial market theory, considers impact of heterogeneity firms’ cycles on economic fluctuations, constructs a DSGE model that incorporates structure, uses to analyse existence multiple equilibria endogenous cycles. Compared with previous models, this highlights asymmetry responses due different emotional shocks as main source volatility, Keynes’ “animal spirits” suggest.