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INDETERMINACY AND INVESTMENT ADJUSTMENT COSTS: AN ANALYTIC RESULT

Published online by Cambridge University Press:  25 March 2003

Jinill Kim
Jinill Kim
Affiliation:
University of Virginia
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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.

Keywords

IndeterminacyInvestment Adjustment Costs
Type
Research Article
Information
Macroeconomic Dynamics , Volume 7 , Issue 3 , June 2003 , pp. 394 - 406
Copyright
© 2003 Cambridge University Press

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