Cover IMF Working Papers
Buy Book in Print
Multiple Equilibrium, Variability, and the Development Process
Author:
Luis Carranza null

Search for other papers by Luis Carranza in
Current site
Google Scholar Close
and
Mr. José Enrique Galdón-Sánchez null

Search for other papers by Mr. José Enrique Galdón-Sánchez in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 062
Language:
English
Publication Date:
01 Apr 1998
DOI:
https://doi.org/10.5089/9781451848267.001
ISBN:
9781451848267
ISSN:
1018-5941
Pages:
28
Keywords:
WP; interest rate; open economy; production function
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1 MB) Download Epub
Per capita output is more volatile in middle-income economies than in both low-income and high-income economies. We examine this pattern in a two-period overlapping generations model with two productive sectors (a developed sector and a subsistence sector) and a credit sector. In the early and mature stages of development, there is a unique equilibrium, because labor and credit markets are cleared by a unique set of prices. In the middle stages of development, however, the model shows that markets can be cleared by a multiple set of prices. This multiplicity of equilibria arises as productive externalities are reflected in credit markets.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund