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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Indeterminacy under Social Constant Returns and Costs of Adjusting Capital

Vol.23, No.3, September , 187–200



  •   (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.


Keywords
   Indeterminacy, Constant Returns to Scale, Costs of Adjusting Capital

JEL classification codes
   E00, E22, E32
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