EconPapers    
Economics at your fingertips  
 

Determinacy Through Intertemporal Adjustment Costs

Berthold Herrendorf () and Akos Valentinyi ()

Review of Economic Dynamics, 2003, vol. 6, issue 3, 483-497

Abstract: It is well known that if there are mild sector-specific externalities, then the steady state of the standard two-sector real business cycle model can become indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard intertemporal capital adjustment costs, which may accrue when total capital is adjusted or when each sector's capital is adjusted. We find for both forms of adjustments costs that the steady state is determinate for all empirically plausible parameter values. We also find that determinacy occurs for a much larger range of parameter values when adjusting each sector's capital is costly. (Copyright: Elsevier)

Keywords: capital adjustment costs; determinacy; indeterminacy; local stability; sector-specific externality. (search for similar items in EconPapers)
JEL-codes: E0 E3 (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1016/S1094-2025(03)00020-6 Full text (application/pdf)
Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

Related works:
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: https://EconPapers.repec.org/RePEc:red:issued:v:6:y:2003:i:3:p:483-497

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/S1094-2025(03)00020-6

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2021-01-13
Handle: RePEc:red:issued:v:6:y:2003:i:3:p:483-497