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- Title
Growth and equilibrium indeterminacy: the role of capital mobility.
- Authors
Lahiri, Amartya
- Abstract
Summary. The paper presents a human capital driven endogenous growth model which, in general, permits a multiplicity of equilibrium balanced growth paths. It is shown that allowing tot perfect capital mobility across countries increases the range of parameter values for which the model permits equilibrium indeterminacy. As opposed to the closed capital markets case, simple restrictions on preferences are no longer sufficient to eliminate the indeterminacy. Intuitively, under perfect capital mobility agents are able to smooth consumption completely. This induces an economy with open capital markets to behave like a closed economy with linear preferences thereby increasing the possibility of equilibrium indeterminacy.
- Subjects
HUMAN capital; ECONOMIC equilibrium; CAPITAL market; CONSUMPTION (Economics)
- Publication
Economic Theory, 2001, Vol 17, Issue 1, p197
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/PL00004097