Optimal Accumulation in a Small Open Economy with Technological Uncertainty
This paper analyzes the optimal allocation problem of a small country facing an uncertain technology and trading. 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.
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