Indeterminacy of rational expectations equilibrium: sunspot equilibria and dynamical systems.

Summary The existence of "sunspot" equilibria is studied in several models of dynamic economies with an infinite horizon. The existence of such equilibria highlights a problem of indetermination of the rational expectations equilibrium and plays a role of first order in the explanation of fluctuations and instability of the economy. Three specific questions are addressed: (1) the existence of "sunspot" equilibria in economies with generations of debt. (2) the actual number of states between which the "sunspot" equilibria detected by the poincare-hopf theorem fluctuate. (3) the existence of local finite sunspot equilibria around a rest state of a dynamical system with "memory" or predetermined variables. All the results found coincide in showing the robustness of the phenomenon of self-fulfilling prophecies in these economies.