Zhang, Yan and Chen, Yan (2009): Tariff and Equilibrium Indeterminacy - A Global Analysis.
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Zhang (2009) shows that endogenous tariffs and endogenous labor income taxes (Schmitt-Grohe and Uribe, 1997) are equivalent in generating local indeterminacy. Using the method developed by Stockman (2009), we extend Zhang's analysis to prove that they are also equivalent in generating global indeterminacy (chaotic equilibria) under a balanced-budget rule. We show that the existence of Euler equation branching in an arbitrarily small neighborhood of a steady state can imply topological chaos in the sense of Devaney. In addition, the Euler equation branching occurs regardless of the local uniqueness of the equilibrium around the steady state(s).
|Item Type:||MPRA Paper|
|Original Title:||Tariff and Equilibrium Indeterminacy - A Global Analysis|
|Keywords:||Endogenous Tariff Rate, Regime Switching, Chaos.|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
|Depositing User:||Yan Zhang|
|Date Deposited:||02. Nov 2009 06:10|
|Last Modified:||19. Feb 2013 00:03|
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