It has been widely known that neoclassical growth models with sufficient increasing returns in production may feature indeterminacy. This note analytically shows that investment adjustment costs increase the required degree of increasing returns for indeterminacy to arise. Under empirically plausible levels of investment adjustment costs, we need an implausibly large degree of increasing returns to generate indeterminacy.
|Number of pages||13|
|Publication status||Published - 2003 Jun|
- Investment Adjustment Costs
ASJC Scopus subject areas
- Economics and Econometrics