Endogenous Fluctuations In an Open Economy with Increasing Returns to Scale

Marta Aloi, Huw Dixon and Teresa Lloyd-Braga

No 98-03, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: In this paper we study the effects of opening an economy, with increasing returns in the production of non traded goods, on the existence of multiple Pareto-ranked stationary equilibria, local indeterminacy and bifurcations. We consider a standard Overlapping Generation Model of a small open economy, with a fixed exchange rate, where labour is the only input and money the only asset. We find that when there are increasing returns, the open economy may display persistent equilibrium endogenous fluctuations (deterministic and stochastic) in the balance of trade and main macroeconomic aggregates.

Keywords: endogenous fluctuations; increasing returns to scale; small open economy (search for similar items in EconPapers)
JEL-codes: D43 E32 F40 (search for similar items in EconPapers)
Pages: 33 pages
Date: 1998-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in: Journal of Econ Dynamics & Control, 24(1) 2000, 97-125

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http://dx.doi.org/10.1016/S0165-1889(98)00063-3

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Journal Article: Endogenous fluctuations in an open economy with increasing returns to scale (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9803

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