Indeterminacy under social constant returns and costs of adjusting capital

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It has been shown that, in a small open economy with traded and nontraded goods, indeterminacy occurs under constant returns to scale for the social technology with an arbitrarily small degree of externalities. This paper claims that costs of adjusting capital increase the required degree of externalities for indeterminacy to arise. Under empirically plausible levels of adjustment costs and externalities, indeterminacy does not arise in a model with social constant returns.

Original languageEnglish
Pages (from-to)187-200
Number of pages14
JournalJournal of Economic Theory and Econometrics
Issue number3
Publication statusPublished - 2012 Sept


  • Constant Returns to Scale
  • Costs of Adjusting Capital
  • Indeterminacy

ASJC Scopus subject areas

  • Economics and Econometrics


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