Indeterminacy in a Small Open Economy Ramsey Growth Model

Mark Weder

No 2585, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper presents a small open economy version of the Benhabib and Farmer [2] two sector optimal growth model with production externalities. It is shown that indeterminacy is considerably easier to obtain under a regime of perfect world capital markets than in the closed economy variant. Furthermore, the result is not dependent on high labour supply elasticity since that input is fixed. The paper also examines a variant that takes into account external borrowing constraints and it is shown that the qualitative results on indeterminacy remain basically unaffected by this extension.

Keywords: Indeterminacy; Small open economies; Increasing returns (search for similar items in EconPapers)
JEL-codes: E32 F12 (search for similar items in EconPapers)
Date: 2000-10
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Citations: View citations in EconPapers (3)

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Journal Article: Indeterminacy in a Small Open Economy Ramsey Growth Model (2001)
Working Paper: Indeterminacy in the small open economy Ramsey growth model (1999)
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