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 InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 98-03.
Length: 33 pages
Date of creation: Feb 1998
Date of revision:
Publication status: Published in: Journal of Econ Dynamics & Control, 24(1) 2000, 97-125
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endogenous fluctuations; increasing returns to scale; small open economy;
Other versions of this item:
- Aloi, Marta & Dixon, Huw D. & Lloyd-Braga, Teresa, 2000. "Endogenous fluctuations in an open economy with increasing returns to scale," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 97-125, January.
- 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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