The present study differs from these works in that we provide multiple steady states without the labor-leisure choice and presents indeterminacy properties under negligible, but not zero, externalities. In addition, it shows that the steady state with indeterminacy has a higher growth rate, which is consistent with the following evidence:
before a shock hits, the economy often grows at a higher rate and economists have tried to give explanation on this. Generally speaking, they view these shocks as monetary phenomena; for example, Woodford (1990) explain crowding-in of investment under the existence of bubble, and Kunieda and Shibata (2012) shows that the bubble burst was preceded by high TFP growth, and developes the model with TPF growth under boom with bubble. Contrasting these studies, our model is non-monetary one and these phenomena are explained using equilibrium growth dynamics with a high growth rate and indeterminacy properties obtained in this study.
