Optimal accumulation in a small open economy with technological uncertainty |
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Authors: | Manjira Datta |
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Institution: | (1) Department of Economics, Arizona State University, Box 873806, Tempe, AZ 85287-3806, USA (e-mail:manjira@asu.edu), US |
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Abstract: | Summary. This paper analyzes the optimal allocation problem of a small trading country facing an uncertain technology. It is involved
in production of many commodities. Differentiability cannot be guaranteed, hence, the Ramsey-Euler condition of optimality
needs to be modified. From the optimality criterion, we derive a pair of conditions, which does not require differentiability.
If “enough” uncertainty is allowed, the sequence of the distribution functions of investment expenditure converges uniformly
to a unique invariant measure. In addition to the weak convergence of the stochastic process of investment expenditure we
also have the sequences of the stochastic process of investment expenditure converging weakly.
Received: September 8, 1994; revised version: September 25, 1997 |
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Keywords: | JEL Classification Numbers: C61 D90 O41 |
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