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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society
Indeterminacy under Social Constant Returns and Costs of Adjusting Capital
Vol.23, No.3, September 2012, 187–200
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Jinill Kim
(Korea University)
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Abstract
It has been shown that, in a small open economy with traded and nontraded goods, indeterminacy occurs under constant returns to scale for the social technology with an arbitrarily small degree of externalities. This paper claims that costs of adjusting capital increase the required degree of externalities for indeterminacy to arise. Under empirically plausible levels of adjustment costs and externalities, indeterminacy does not arise in a model with social constant returns.t arise in a model with social constant returns.
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Keywords
Indeterminacy, Constant Returns to Scale, Costs of Adjusting Capital |
JEL classification codes
E00, E22, E32 |
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