To what extent protectionism affects growth and (de)stabilizes the economies? Although the impact of protectionism on growth has been widely explored without reaching a consensus, few has been said on its impact on macroeconomic stability. The present paper attempts to gauge more precisely its implications using a Barro-type (Barro, 1990) endogenous growth model with public debt and credit constraint where tariffs are a proxy of protectionism. Our main result is to show that when the debt level is high, and the share of foreign goods in total consumption is large enough, increasing tariffs may have a destabilizing effect generating some expectation coordination failures between multiple equilibria. We also exhibit some trade-off between tariffs and growth as tariffs are beneficial only to the low growth equilibrium which may only appear when the international interest rate is low enough. Finally, focusing on the local stability property, we show that the high BGP is always characterized by local indeterminacy, while the low BGP is always a saddle point. We then prove that tariffs may be responsible for the existence of large self-fulfilling fluctuations.

When can exogenous changes in beliefs generate endogenous fluctuations in rational expectation models? We analyze this question in the canonical one-sector and two-sector models of the business cycle with increasing returns to scale. A key feature of our analysis is that we express the uniqueness/multiplicity condition of equilibirum paths in terms of restrictions on five critical and economically interpretable parameters: the Frisch elasticities of the labor supply curve with respect to the real wage and to the marginal utility of wealth, the intertemporal elasticity of substitution in consumption, the elasticity of substitution between capital and labor, and the degree of increasing returns to scale. We obtain two clear-cut conclusions: belief-driven fluctuations cannot exist in the one-sector version of the model for empirically consistent values for these five parameters. By contrast, belief-driven fluctuations are a robust property of the two-sector version of the model—with differentiated consumption and investment goods—, as they now emerge for a wide range of parameter values consistent with available empirical estimates. The key ingredients explaining these different outcomes are factor reallocation between sectors and the implied variations in the relative price of investment, affecting the expected return on capital accumulation.

This paper provides a long-run cycle perspective to explain the behavior of the annual flow of inheritance. Based on the low- and medium frequency properties of long time bequests series in Sweden, France, UK, and Germany, we explore the extent to which a two-sector Barro-type OLG model is consistent with such empirical regularities. As long as agents are sufficiently impatient and preferences are non-separable, we show that endogenous fluctuations are likely to occur through two mechanisms, which can generate independently or together either period-2 cycles or Hopf bifurcations. The first mechanism relies on the elasticity of intertemporal substitution or equivalently the sign of the cross-derivative of the utility function whereas the second rests on sectoral technologies through the sign of the capital intensity difference across two sectors. Furthermore, building on the quasi-palindromic nature of the degree-4 characteristic equation, we derive some meaningful sufficient conditions associated to the occurrence of complex roots and a Hopf bifurcation in a two-sector OLG model.

This paper is an introduction to the special issue of Mathematical Social Sciences on Advances in growth and macroeconomic dynamics in memory of Carine Nourry.