Foreign Trade and Equilibrium Indeterminacy

Luís Aguiar-Conraria () and Yi Wen ()

Working Papers from Cornell University, Center for Analytic Economics

Abstract: We show that dependence of production on foreign inputs (or non-producible natural resources) can significantly increase the likelihood of indeterminacy. Payment of imported foreign factors of production may act as a semi-fixed cost, amplifying production externalities and returns to scale, making self-fulfilling expectations driven busyness cycles easier to arise. This is demonstrated using a standard neoclassical growth model. Calibration exercise shows that the required increasing returns to scale can be reduced by as much as 64% based on estimated share of foreign inputs in production for OECD countries.

JEL-codes: E13 E20 E30 (search for similar items in EconPapers)
Date: 2004-05
View list of references View citations in EconPapers

Downloads: (external link)
http://www.arts.cornell.edu/econ/CAE/04-09.pdf

Related works:
Working Paper: Foreign trade and equilibrium indeterminacy (2005)
Working Paper: Foreign Trade and Equilibrium Indeterminacy (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ecl:corcae:04-09

Access Statistics for this paper

More papers in Working Papers from Cornell University, Center for Analytic Economics
Contact information at EDIRC.
Series data maintained by ().