This paper examines the stability of a small open economy under alternative income taxation rules. Using a one-sector real business cycle model with external increasing returns, we show that if the income taxation is progressive, the small open economy will not generate equilibrium...

The stabilization effect of nonlinear income taxation is addressed in the standard model of small open economy. It is shown that if income taxation schedule is progressive, the small open economy tends hold saddle-point stability. On the other hand, if taxation on the interest income is...

This paper investigates whether the external consumption habit can be a source of indeterminacy in a one-sector growth model when the labor supply is elastic. When there is a proper habit effect with a positive intertemporal elasticity of substitution, we find that the model exhibits...

In one-sector neoclassical growth models, consumption externalities lead to an inefficient allocation in a steady state and indeterminate equilibrium toward a steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even without a...

One-sector neoclassical growth models reveal that consumption externalities lead to inefficient allocation in a steady state and indeterminate equilibrium toward the steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even...

This paper envisages whether an external habit effect can produce indeterminate equilibrium paths thereby generating endogenous investment fluctuations. In an otherwise standard optimal growth model with leisure, we find that an external habit effect can cause endogenous investment fluctuations...