Factors substitutability, heterogeneity and endogenous fluctuations in a finance constrained economy (Q5927700)

The author examines the local properties of a perfect foresight equilibrium of a finance constrained economy featuring two classes of infinitely-lived agents with heterogeneous preferences. It is shown that under the gross substitute axiom the emergence of Flip cycles necessitates a low inputs substitutability. Moreover, heterogeneity in preferences allows Hopf cycles to appear for a wide range of elasticities of substitution including the unitary one (Cobb-Douglas specifications).