2004•Econstor (Econstor)Open access

A Note on Instability and Indeterminacy in Search and Matching Models

Michael U. Krause, Thomas A. Lubik

Abstract

We demonstrate the possibility of indeterminacy and non-existence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parametrizations and do not rely upon a mechanism such as increasing returns. JEL CLASSIFICATION: E24, J64

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Key concepts: Indeterminacy (philosophy), Business cycle, Economics, Matching (statistics), Econometrics, Instability, Mathematical economics, Mechanism (biology)