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Industry clusters and macroeconomic (in)stability

Published online by Cambridge University Press:  23 September 2024

Cheng-wei Chang Open the ORCID record for Cheng-wei Chang [Opens in a new window]
Cheng-wei Chang*
Affiliation:
Department of Economics, Tunghai University, Taichung, Taiwan
*
Email: [email protected]
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Abstract

While the competitive behavior of firms with regard to entry and exit activities serves as a driving force behind the business cycle, little attention has been paid to the issue of industry clusters when discussing belief-driven cyclical fluctuations. Faced with this deficiency, this study analyzes the possibility of the emergence of equilibrium indeterminacy from the perspective of industrial organization. By analyzing the effects of endogenous overhead costs in the market, this paper finds that belief-driven business cycle fluctuations are related to industry clusters. More specifically, a stronger spillover effect or a less pronounced congestion effect tends to increase the likelihood of local indeterminacy.

Keywords

Monopolistic competitionindustry clustersequilibrium indeterminacyD43E32L25
Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e32
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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