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TitleForeign trade and equilibrium indeterminacy
Author(s)Conraria, Luís Aguiar
Wen, Yi
Factor imports
Natural resources
Capacity utilization
Returns to scale
Open economy
Self-fulfilling expectations
Issue date2004
Series/Report no.Working paper series / NIPE
Abstract(s)Foreign Trade and Equilibrium Indeterminacy Abstract: We show that dependence of production on foreign inputs (or non-producible natural resources) can significantly increase the likelihood of indeterminacy. Payment of imported foreign factors of production may act as a semi-fixed cost, amplifying production externalities and returns to scale, making selffulfilling expectations driven busyness cycles easier to arise. This is demonstrated using a standard neoclassical growth model. Calibration exercise shows that the required increasing returns to scale can be reduced by as much as 64% based on estimated share of foreign inputs in production for OECD countries.
TypeWorking paper
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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