Capital depreciation , factor substitutability and indeterminacy ∗
نویسندگان
چکیده
We consider a discrete-time two-sector CES economy with sector specific external effects and partial depreciation of capital. We show that the occurrence of local indeterminacy of equilibria depends on an interplay between factor substitutability and capital depreciation. When the elasticity of substitution is less than one, local indeterminacy may occur with low depreciation of capital. When the elasticity of substitution is greater than one, local indeterminacy is more likely if the rate of depreciation is high.
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Article history: Accepted 17 January 2014 Available online 15 February 2014 JEL classification: C62 E21 E22
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