Optimal accumulation in a small open economy with technological uncertainty

Manjira Datta

Economic Theory, 1999, vol. 13, issue 1, 207-219

Abstract: This paper analyzes the optimal allocation problem of a small trading country facing an uncertain technology. It is involved in production of many commodities. Differentiability cannot be guaranteed, hence, the Ramsey-Euler condition of optimality needs to be modified. From the optimality criterion, we derive a pair of conditions, which does not require differentiability. If "enough" uncertainty is allowed, the sequence of the distribution functions of investment expenditure converges uniformly to a unique invariant measure. In addition to the weak convergence of the stochastic process of investment expenditure we also have the sequences of the stochastic process of investment expenditure converging weakly.

JEL-codes: C61 D90 O41 (search for similar items in EconPapers)
Date: 1998-12-04
Note: Received: September 8, 1994; revised version: September 25, 1997
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Working Paper: Optimal Accumulation in a Small Open Economy with Technological Uncertainty
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