IDEAS home Printed from https://ideas.repec.org/p/ucr/wpaper/200913.html
   My bibliography  Save this paper

Indeterminacy and Investment Adjustment Costs in an Endogenously Growing Small Open Economy

Author

Listed:
  • Jang-Ting Guo

    () (Department of Economics, University of California Riverside)

  • Chi-Ting Chin

    () (Ming Chuan University)

  • Ching-Chong Lai

    () (Academia Sinica National Chengchi University)

Abstract

This paper analytically examines the interrelations between macroeconomic (in)stability and investment adjustment costs in a one-sector endogenously growing small-open-economy representative agent model. We show that under costly capital accumulation, the economy exhibits indeterminacy and sunspots if and only if the equilibrium wage-hours locus slopes upwards and is steeper than the householdiÌ s labor supply curve. By contrast, the economy without adjustment costs for capital investment always displays saddle-path stability and equilibrium uniqueness, regardless of the degree of increasing returns in aggregate production.Â

Suggested Citation

  • Jang-Ting Guo & Chi-Ting Chin & Ching-Chong Lai, 2009. "Indeterminacy and Investment Adjustment Costs in an Endogenously Growing Small Open Economy," Working Papers 200913, University of California at Riverside, Department of Economics, revised Nov 2009.
  • Handle: RePEc:ucr:wpaper:200913
    as

    Download full text from publisher

    File URL: http://economics.ucr.edu/repec/ucr/wpaper/09-13.pdf
    File Function: First version, 2009
    Download Restriction: no

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    2. Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers tep0107, Trinity College Dublin, Department of Economics.
    3. ., 2008. "The Circulation War," Chapters,in: Information Revolutions in the History of the West, chapter 7 Edward Elgar Publishing.
    4. Editors, 2008. "Software updates," Stata Journal, StataCorp LP, vol. 8(3), pages 452-452, September.
    5. Charles W. Calomiris & Stephen H. Haber, 2015. "Fragile by Design: The Political Origins of Banking Crises and Scarce Credit," Economics Books, Princeton University Press, edition 1, number 10177-2, June.
    6. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    7. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    8. anonymous, 2008. "2007 M&SOM Meritorious Service Award," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 332-332.
    9. Ronald Findlay & Kevin H. O'Rourke, 2007. "Introduction to Power and Plenty: Trade, War, and the World Economy in the Second Millennium," Introductory Chapters,in: Power and Plenty: Trade, War, and the World Economy in the Second Millennium Princeton University Press.
    10. Editors, 2008. "Software updates," Stata Journal, StataCorp LP, vol. 8(1), pages 146-146, February.
    11. Ronald Findlay & Kevin H. O'Rourke, 2007. "Preface to Power and Plenty: Trade, War, and the World Economy in the Second Millennium," Introductory Chapters,in: Power and Plenty: Trade, War, and the World Economy in the Second Millennium Princeton University Press.
    12. Editors, 2008. "Software updates," Stata Journal, StataCorp LP, vol. 8(4), pages 594-594, December.
    13. Anonymous, 2008. "NAREA Awards," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lai, Chung-hui, 2013. "(In)determinacy, bargaining, and R&D policies in an economy with endogenous technological change," Economics Discussion Papers 2013-14, Kiel Institute for the World Economy (IfW).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucr:wpaper:200913. 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: (Kelvin Mac). General contact details of provider: http://edirc.repec.org/data/deucrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.