Optimal accumulation in a small open economy with technological uncertainty
This paper analyzes the optimal allocation problem of a small trading country facing an uncertain technology. It is involved in production of many commodities. Differentiability cannot be guaranteed, hence, the Ramsey-Euler condition of optimality needs to be modified. From the optimality criterion, we derive a pair of conditions, which does not require differentiability. If "enough" uncertainty is allowed, the sequence of the distribution functions of investment expenditure converges uniformly to a unique invariant measure. In addition to the weak convergence of the stochastic process of investment expenditure we also have the sequences of the stochastic process of investment expenditure converging weakly.
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Volume (Year): 13 (1999)
Issue (Month): 1 ()
|Note:||Received: September 8, 1994; revised version: September 25, 1997|
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