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Title: Indeterminacy in a Small Open Economy Ramsey Growth Model

Author(s): Mark Weder

Publication Date: October 2000

Keyword(s): Increasing Returns, Indeterminacy and Small Open Economies

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Weder, M. 2000. 'Indeterminacy in a Small Open Economy Ramsey Growth Model'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2585