Endogenous fluctuations in an open economy with increasing returns to scale
AbstractIn this paper we study the effects of opening an economy, with increasing returns in the production of non traded goods, on the existence of multiple Pareto-ranked stationary equilibria, local indeterminacy and bifurcations. We consider a standard Overlapping Generation Model of a small open economy, with a fixed exchange rate, where labour is the only input and money the only asset. We find that when there are increasing returns, the open economy may display persistent equilibrium endogenous fluctuations (deterministic and stochastic) in the balance of trade and main macroeconomic aggregates.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 24 (2000)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/jedc
Other versions of this item:
- Marta Aloi & Huw D. Dixon & Teresa Lloyd-Braga, 1998. "Endogenous Fluctuations In an Open Economy with Increasing Returns to Scale," Discussion Papers 98-03, University of Copenhagen. Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
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