Optimal accumulation in a small open economy with technological uncertainty

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1 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)207-219
Number of pages13
JournalEconomic Theory
Volume13
Issue number1
DOIs
StatePublished - Jan 1999

ASJC Scopus subject areas

  • Economics and Econometrics

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