Tariff and Equilibrium Indeterminacy - A Global Analysis
AbstractZhang (2009) shows that endogenous tariffs and endogenous labor income taxes (Schmitt-Grohe and Uribe, 1997) are equivalent in generating local indeterminacy. Using the method developed by Stockman (2009), we extend Zhang's analysis to prove that they are also equivalent in generating global indeterminacy (chaotic equilibria) under a balanced-budget rule. We show that the existence of Euler equation branching in an arbitrarily small neighborhood of a steady state can imply topological chaos in the sense of Devaney. In addition, the Euler equation branching occurs regardless of the local uniqueness of the equilibrium around the steady state(s).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18296.
Date of creation: 01 Nov 2009
Date of revision:
Endogenous Tariff Rate; Regime Switching; Chaos.;
Other versions of this item:
- Zhang, Yan & Chen, Yan, 2012. "Tariff And Equilibrium Indeterminacy: A Global Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S3), pages 394-410, November.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-DGE-2009-11-07 (Dynamic General Equilibrium)
- NEP-MAC-2009-11-07 (Macroeconomics)
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