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Author Steger, Thomas M. ♦ Schäfer, Andreas
Source EconStor
Content type Text
Publisher Verein für Socialpolitik
File Format PDF
Language English
Subject Domain (in DDC) Social sciences ♦ Economics
Subject Keyword increasing returns to scale ♦ capital mobility ♦ migration ♦ multiple equilibria ♦ indeterminacy ♦ history vs. expectations ♦ economic policy ♦ Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ♦ Taxation, Subsidies, and Revenue: General ♦ Economic Growth and Aggregate Productivity: General
Abstract Motivated by the process of economic development in Eastern Germany since the German reunification we set up a dynamic macroeconomic model of a small open economy where both capital and labor are mobile and there are increasing returns to scale at the aggregate level. The model features multiple equilibria and (local and global) indeterminacy. Expectations matter for resulting equilibrium dynamics, implying that good or bad moods are crucial for the process of economic development. We argue that this simple model is in line with the major stylized facts. The model is also instructive when it comes to better understanding the consequences of macroeconomic supply side policy and the pattern of East-West convergence.
Part of series Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Aspects of the German Economy xB12-V3
Learning Resource Type Article
Publisher Date 2010-01-01
Publisher Place Frankfurt a. M.
Rights Holder