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Indeterminacy in a Small Open Economy Ramsey Growth Model

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  • Weder, Mark

Abstract

This paper presents a small open economy version of the Benhabib and Farmer [2] two sector optimal growth model with production externalities. It is shown that indeterminacy is considerably easier to obtain under a regime of perfect world capital markets than in the closed economy variant. Furthermore, the result is not dependent on high labour supply elasticity since that input is fixed. The paper also examines a variant that takes into account external borrowing constraints and it is shown that the qualitative results on indeterminacy remain basically unaffected by this extension.

Suggested Citation

  • Weder, Mark, 2000. "Indeterminacy in a Small Open Economy Ramsey Growth Model," CEPR Discussion Papers 2585, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2585
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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