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Autarkic Indeterminacy and Trade Determinacy


  • Nicholas Sim

    (Boston College)

  • Kong-Weng Ho

    (National University of Singapore)


Most existing evidences for indeterminacy are obtained from analyzing models that do not consider trade. This paper considers an extension of Nishimura and Shimomura (Journal of Economic Theory, 2002) Heckscher-Ohlin framework by removing sector-specific externalities in one country while maintaining all other assumptions previously made by the authors. We show that even though indeterminacy arises under autarky, it can be eliminated when trade takes place with another country exhibiting saddle-path stability. Consequently, support for indeterminacy from calibrating an autarkic framework should be treated with some degree of caution.

Suggested Citation

  • Nicholas Sim & Kong-Weng Ho, 2005. "Autarkic Indeterminacy and Trade Determinacy," Departmental Working Papers wp0507, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0507

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    References listed on IDEAS

    1. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    2. Jess Benhabib & Qinglai Meng & Kazuo Nishimura, 2000. "Indeterminacy under Constant Returns to Scale in Multisector Economies," Econometrica, Econometric Society, vol. 68(6), pages 1541-1548, November.
    3. Nishimura, Kazuo & Shimomura, Koji, 2002. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 244-260, July.
    4. Kazuo Nishimura & Alain Venditti & Makoto Yano, 2006. "Endogenous Fluctuations In Two-Country Models," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 516-532.
    5. Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July.
    6. Nishimura, Kazuo & Yano, Makoto, 1993. "Interlinkage in the Endogenous Real Business Cycles of International Economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 151-168, January.
    7. Benhabib, Jess & Farmer, Roger E. A., 1996. "Indeterminacy and sector-specific externalities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 421-443, June.
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    Cited by:

    1. Antoine Le Riche, 2016. "Macroeconomic Volatility and Trade in OLG Economies," Working Papers halshs-01079773, HAL.
    2. repec:bla:ijethy:v:13:y:2017:i:4:p:401-425 is not listed on IDEAS
    3. Antoine Le Riche, 2014. "Macroeconomic Volatility and Trade in OLG Economies," AMSE Working Papers 1446, Aix-Marseille School of Economics, Marseille, France, revised Nov 2014.
    4. Kazuo Nishimura & Alain Venditti & Makoto Yano, 2010. "Expectation-driven fluctuations and welfare loss under free trade in two-country models," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 97-125.
    5. Hu, Yunfang & Mino, Kazuo, 2013. "Trade structure and belief-driven fluctuations in a global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 414-424.
    6. Yunfang Hu & Kazuo Mino, 2011. "Globalization and Volatility under Alternative Trade Structures," KIER Working Papers 791, Kyoto University, Institute of Economic Research.

    More about this item


    Indeterminacy; Trade; Two-Country; Heckscher-Ohlin;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F00 - International Economics - - General - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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