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Foreign Trade and Equilibrium Indeterminacy Author info | Abstract | Publisher info | Download info | Related research | Statistics Luís Francisco Aguiar-Conraria () (Universidade do Minho - NIPE )
Yi Wen (Department of Economics - Cornell University)
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We show that dependence of production on foreign inputs (or non-producible natural resources) can significantly increase the likelihood of indeterminacy. Payment of imported foreign factors of production may act as a semi-fixed cost, amplifying production externalities and returns to scale, making selffulfilling expectations driven busyness cycles easier to arise. This is demonstrated using a standard neoclassical growth model. Calibration exercise shows that the required increasing returns to scale can be reduced by as much as 64% based on estimated share of foreign inputs in production for OECD countries.
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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number
5/2004.
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Date of creation: 2004Date of revision:
Handle: RePEc:nip:nipewp:5/2004Contact details of provider: Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal Phone: +351-253604510 ext 5532 Fax: +351-253601380 Email: Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm More information through EDIRC
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Keywords: Indeterminacy Factor Imports Natural Resources Capacity Utilization Externality Returns to Scale Open Economy Sunspots Self- Fulfilling Expectations. Other versions of this item:
Find related papers by JEL classification: E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data) E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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Luis Aguiar-Conraria & Yi Wen, 2006.
"Understanding the large negative impact of oil shocks ,"
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2006-060, Federal Reserve Bank of St. Louis.
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"Understanding the Impact of Oil Shocks ,"
NIPE Working Papers
2/2005, NIPE - Universidade do Minho.
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