eprintid: 22529 rev_number: 18 eprint_status: archive userid: 1482 importid: 105 dir: disk0/00/02/25/29 datestamp: 2016-11-22 08:22:06 lastmod: 2021-04-02 15:54:21 status_changed: 2017-02-24 10:07:25 type: monograph metadata_visibility: no_search creators_name: Beaudry, Paul creators_name: Galizia, Dana creators_name: Portier, Franck creators_idrefppn: 035426225 title: Is the Macroeconomy Locally Unstable and Why Should We Care? ispublished: pub subjects: subjects_ECO abstract: In most modern macroeconomic models, the steady state (or balanced growth path) of the system is a local attractor, in the sense that, in the absence of shocks, the economy would converge to the steady state. In this paper, we examine whether the time series behavior of macroeconomic aggregates (especially labor market aggregates) is in fact supportive of this local-stability view of macroeconomic dynamics, or if it instead favors an alternative inter- pretation in which the macroeconomy may be better characterized as being locally unstable, with nonlinear deterministic forces capable of producing endogenous cyclical behavior. To do this, we extend a standard AR representation of the data to allow for smooth nonlinearities. Our main finding is that, even using a procedure that may have low power to detect local instability, the data provide intriguing support for the view that the macroeconomy may be locally unstable and involve limit-cycle forces. An interesting finding is that the degree of nonlinearity we detect in the data is small, but nevertheless enough to alter the description of macroeconomic behavior. We complete the paper with a discussion of the extent to which these two different views about the inherent dynamics of the macroeconomy may matter for policy. date: 2016-11 date_type: published publisher: TSE Working Paper official_url: http://tse-fr.eu/pub/31201 faculty: tse divisions: tse keywords: Macroeconomic Fluctuations keywords: Limit Cycle keywords: Unemployment language: en has_fulltext: TRUE subjectsJEL: JEL_E24 subjectsJEL: JEL_E3 subjectsJEL: JEL_E32 view_date_year: 2016 full_text_status: public monograph_type: working_paper series: TSE Working Paper volume: 16-736 place_of_pub: Toulouse pages: 52 institution: Université Toulouse 1 Capitole department: Toulouse School of Economics book_title: TSE Working Paper oai_identifier: oai:tse-fr.eu:31201 harvester_local_overwrite: department harvester_local_overwrite: faculty harvester_local_overwrite: place_of_pub harvester_local_overwrite: pages harvester_local_overwrite: institution harvester_local_overwrite: creators_idrefppn oai_lastmod: 2017-02-21T08:33:29Z oai_set: tse site: ut1 citation: Beaudry, Paul, Galizia, Dana and Portier, Franck (2016) Is the Macroeconomy Locally Unstable and Why Should We Care? TSE Working Paper, n. 16-736, Toulouse document_url: https://publications.ut-capitole.fr/id/eprint/22529/1/Beaudry_22529.pdf