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Indeterminacy And Investment Adjustment Costs: An Analytic Result

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  • Kim, Jinill

Abstract

It has been widely known that neoclassical growth models with sufficient increasing returns in production may feature indeterminacy. This note analytically shows that investment adjustment costs increase the required degree of increasing returns for indeterminacy to arise. Under empirically plausible levels of investment adjustment costs, we need an implausibly large degree of increasing returns to generate indeterminacy.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 7 (2003)
Issue (Month): 03 (June)
Pages: 394-406

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Handle: RePEc:cup:macdyn:v:7:y:2003:i:03:p:394-406_02

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Cited by:
  1. Gershun, Natalia, 2010. "Habit persistence, impediments to production factor adjustments, and asset returns in general equilibrium models with self-fulfilling expectations," Review of Financial Economics, Elsevier, vol. 19(1), pages 19-27, January.
  2. Berthold Herrendorf & Akos Valentinyi, . "On the Stability of the Two-Sector Neoclassical Growth Model with Externalities," Working Papers 2167721, Department of Economics, W. P. Carey School of Business, Arizona State University.
  3. Pengfei Wang & Yi Wen, 2007. "Imperfect competition and indeterminacy of aggregate output," Working Papers 2006-017, Federal Reserve Bank of St. Louis.
  4. Kim, Jinill, 2004. "What determines aggregate returns to scale?," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1577-1594, June.
  5. Carboni, Oliviero A. & Russu, Paolo, 2013. "Linear production function, externalities and indeterminacy in a capital-resource growth model," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 422-428.
  6. Tarek Coury & Yi Wen, 2007. "Global indeterminacy in locally determinate RBC models," Working Papers 2007-029, Federal Reserve Bank of St. Louis.
  7. Kim, Jinill, 2005. "Does utility curvature matter for indeterminacy?," Journal of Economic Behavior & Organization, Elsevier, vol. 57(4), pages 421-429, August.

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