Tariff And Equilibrium Indeterminacy: A Global Analysis
Zhang (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).
(This abstract was borrowed from another version of this item.)
Volume (Year): 16 (2012)
Issue (Month): S3 (November)
|Contact details of provider:|| Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK|
Web page: http://journals.cambridge.org/jid_MDY
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gardini, Laura & Hommes, Cars & Tramontana, Fabio & de Vilder, Robin, 2009.
"Forward and backward dynamics in implicitly defined overlapping generations models,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 71(2), pages 110-129, August.
- Laura Gardini & Cars Hommes & Fabio Tramontana & Robin de Vilder, 2008. "Forward and Backward Dynamics in Implicitly Defined Overlapping Generations Models," Working Papers 0806, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2008.
- Gardini, L. & Hommes, C.H. & Tramontana, F. & de Vilder, R., 2009. "Forward and Backward Dynamics in implicitly defined Overlapping Generations Models," CeNDEF Working Papers 09-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Aguiar-Conraria, Luis & Wen, Yi, 2004. "Foreign Trade and Equilibrium Indeterminacy," Working Papers 04-09, Cornell University, Center for Analytic Economics.
- Luis Aguiar-Conraria & Yi Wen, 2005. "Foreign trade and equilibrium indeterminacy," Working Papers 2005-041, Federal Reserve Bank of St. Louis.
- Luís Francisco Aguiar-Conraria & Yi Wen, 2004. "Foreign Trade and Equilibrium Indeterminacy," NIPE Working Papers 5/2004, NIPE - Universidade do Minho.
- Michener, Ronald & Ravikumar, B., 1998. "Chaotic dynamics in a cash-in-advance economy," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1117-1137, May.
- Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
- Stephanie Schmitt-Grohe & Martin Uribe, 1995. "Balanced-budget rules, distortionary taxes, and aggregate instability," Finance and Economics Discussion Series 95-44, Board of Governors of the Federal Reserve System (U.S.).
- Julio I. Rotemberg & Michael Woodford, 1994. "Energy Taxes and Aggregate Economic Activity," NBER Chapters,in: Tax Policy and the Economy, Volume 8, pages 159-195 National Bureau of Economic Research, Inc.
- Julio J. Rotemberg & Michael Woodford, 1993. "Energy Taxes and Aggregate Economic Activity," NBER Working Papers 4576, National Bureau of Economic Research, Inc.
- Luís Aguiar-Conraria & Yi Wen, 2007. "Understanding the Large Negative Impact of Oil Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 925-944, 06.
- Luis Aguiar-Conraria & Yi Wen, 2006. "Understanding the large negative impact of oil shocks," Working Papers 2005-042, Federal Reserve Bank of St. Louis.
- Stockman, David R., 2010. "Balanced-budget rules: Chaos and deterministic sunspots," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1060-1085, May.
- Aguiar-Conraria, Luís & Wen, Yi, 2008. "A Note On Oil Dependence And Economic Instability," Macroeconomic Dynamics, Cambridge University Press, vol. 12(05), pages 717-723, November.