Non-optimality of the myopic decision rule: The case of a two-sector open economy |
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Authors: | Tapan Biswas |
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Institution: | Department of Economics, University of California, Santa Barbara, California 93106 USA |
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Abstract: | This paper is concerned with optimal allocation of investment in a two-sector open economy with non-shiftable capital. We have assumed a stationary population and fixed terms of trade. It has been shown that, if the economy starts with a small amount of capital in each sector, the myopic decision rule under static expectations will not be compatible with the conditions of optimal investment allocation. |
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