Monopolistic competition, indeterminacy and growth
In this paper we analyse the dynamics of both Romer's original model of endogenous growth and of a modified version where the level of labour and human capital are determined endogenously. We find that the original model can have an indeterminate Balanced Growth Path (BGP) if there is some degree of complementarity between the intermediate inputs, and if agents have a high intertemporal elasticity of substitution of consumption. Once we allow for the endogenous determination of labour and of total human capital, we find that equilibrium can be indeterminate with a much lower elasticity of intertemporal substitution of consumption. Moreover, if some modest increasing returns are introduced into the production function for human capital, the issue of global as opposed to local indeterminacy arises: this refers to situations when there exist multiple determinate BGPs, but where the global dynamics is still indeterminate from given initial conditions.
|Date of creation:||1994|
|Date of revision:||1994|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Farmer Roger E. A. & Guo Jang-Ting, 1994.
"Real Business Cycles and the Animal Spirits Hypothesis,"
Journal of Economic Theory,
Elsevier, vol. 63(1), pages 42-72, June.
- Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Danyang Xie, 2002.
"Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria,"
GE, Growth, Math methods
- Xie Danyang, 1994. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 63(1), pages 97-112, June.
- Jess Benhabib & Roger E.A. Farmer, 1992.
"Indeterminacy and Increasing Returns,"
UCLA Economics Working Papers
646, UCLA Department of Economics.
- Benhabib, Jess & Farmer, Roger E.A., 1991. "Indeterminacy and Increasing Returns," Working Papers 91-59, C.V. Starr Center for Applied Economics, New York University.
- Benhabib, J. & Farmer, R.E.A, 1991. "Indeterminacy and Increasing Returns," Papers 165, Cambridge - Risk, Information & Quantity Signals.
- repec:fth:harver:1532 is not listed on IDEAS
- Gali Jordi, 1994.
"Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand,"
Journal of Economic Theory,
Elsevier, vol. 63(1), pages 73-96, June.
- Jordi Galí, 1993. "Monopolistic competition, business cycles and the composition of aggregate demand," Economics Working Papers 45, Department of Economics and Business, Universitat Pompeu Fabra.
- Gali, J., 1991. "Monopolistic Competition, Business Cycles and the Composition of Aggregate Demand," Papers 92-03, Columbia - Graduate School of Business.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 739-773.
- Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:37411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.