Tariff and Equilibrium Indeterminacy - A Global Analysis

Yan Zhang () and Yan Chen ()

MPRA Paper from University Library of Munich, Germany

Abstract: Zhang (2009) shows that endogenous tariffs and endogenous labor income taxes (Schmitt-Grohe and Uribe, 1997) are equivalent in generating local indeterminacy. Using the method developed by Stockman (2009), we extend Zhang's analysis to prove that they are also equivalent in generating global indeterminacy (chaotic equilibria) under a balanced-budget rule. We show that the existence of Euler equation branching in an arbitrarily small neighborhood of a steady state can imply topological chaos in the sense of Devaney. In addition, the Euler equation branching occurs regardless of the local uniqueness of the equilibrium around the steady state(s).

Keywords: Endogenous Tariff Rate; Regime Switching; Chaos. (search for similar items in EconPapers)
JEL-codes: E62 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2009-11-01
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