Indeterminacy and endogenous fluctuations with arbitrarily small liquidity constraint

The empirical relevance of indeterminacy and sunspot fluctuations has often been questioned on the basis of the implausibly high degrees of increasing returns to scale or unconventional calibrations for the fundamentals required. In this paper we study a one-sector economy with partial cash-inadvance constraint on consumption expenditures and show how such phenomena are by contrast quite pervasive. In fact, their scope improves as soon as the liquidity constraint is set smaller and smaller and eventually, for small enough amplitudes of the liquidity constraint, they are bound to prevail for whatever fundamentals specification