Indeterminacy and investment adjustment costs: An analytic result

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Abstract

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.

Original languageEnglish
Pages (from-to)394-406
Number of pages13
JournalMacroeconomic Dynamics
Volume7
Issue number3
DOIs
Publication statusPublished - 2003 Jun 1
Externally publishedYes

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Keywords

  • Indeterminacy
  • Investment Adjustment Costs

ASJC Scopus subject areas

  • Economics and Econometrics

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