Fickle consumers, durable goods, and business cycles

An analysis of the role of consumer durables in the generation and propagation of business cycles reveals that consumer durables can be modelled in a dynamic general equilibrium model with indeterminacy. This model is capable of generating the degree of persistence without the introduction of serial correlations. It is also shown that returns to scale can be of very low size in multisector models and yet able to generate fully specified general models with indeterminacy.