LOCAL INDETERMINACY IN CONTINUOUS-TIME MODELS: THE ROLE OF RETURNS TO SCALE

The aim of this paper is to discuss the effect on returns to scale on the local determinacy properties of the steady state in a continuous-time two-sector economy with endogenous labor supply and sector-specific externalities. First we show that when labor is inelastic and the elasticity of intertemporal substitution in consumption is large enough, for any configuration of the returns to scale, local indeterminacy is obtained if there is a capital intensity reversal between the private and the social levels. Second, we prove that when labor is infinitely elastic, saddlepoint stability is obtained if the investment good sector has constant social returns, whereas local indeterminacy arises if the investment good sector has increasing social returns and the elasticity of intertemporal substitution in consumption admits intermediate values. Finally, our main conclusion shows that local indeterminacy requires a low elasticity of labor when the investment good has constant social returns, but requires either a low enough or a large enough elasticity of labor when the investment good has increasing social returns.

TECHNOLOGY, PREFERENCE STRUCTURE, AND THE GROWTH EFFECT OF MONEY SUPPLY

This paper studies the growth effect of money supply in the presence of increasing returns and endogenous labor supply. By using a simple model of endogenous growth with a cash-in-advance constraint, it is shown that the growth effect of money supply depends on the specifications of preference structures as well as of the production technology. Either if the production technology exhibits strong nonconvexity or if the utility function has a high elasticity of intertemporal substitution, then there may exist dual balanced-growth equilibria and the impact of a change in money growth depends on which steady state is realized in the long run. It is also shown that there is no systematic relationship between the growth effect of money supply and local determinacy of the balanced growth path.

EXPECTATIONS-DRIVEN FLUCTUATIONS WHEN FACTOR UTILIZATION IS VARIABLE

The present paper studies the influence of variable labor utilization on local indeterminacy and expectations-driven fluctuations, in one-sector models with (nearly) constant returns to scale. It is shown that, in comparison to the configuration of constant input utilization, considering variable utilization reduces the actual possibilities of factor substitution and, consequently, the range of input substitution elasticities that are compatible with endogenous fluctuations. In particular, local indeterminacy and expectations-driven fluctuations occur only if utilization rates are sufficiently inelastic, whereas local determinacy prevails when utilization is highly elastic. However, accounting for the fact that variable utilization reduces theeffectiveelasticity of capital/labor substitution leads us to argue that expectations-driven fluctuations are more plausible because they require larger elasticities ofapparentinput substitution. In contrast with the recent literature, the analysis does not rely on significantly increasing returns to scale in production. Accordingly, the results are not at variance with recent empirical studies emphasizing the importance of variable utilization and denying the evidence of large increasing returns.

On the basis of the hypothesis of local determinacy in the theory of elasto- plastic processes

The hypothesis of local determinancy gives concrete relations of elasto - Plastic processes, where functional of the qrientation and the capacity of stresses vector can be represented as a solution of the set of non - linear ordinary differential equations the behaviours of these functional are studied in the general case on this basis the boundary valuable problem in the theory of plasticity is exactly formulated.