Global Indeterminacy in a Tourism Sector Model

Abstract

l of a open economy specialized in tourism based on natural resources. Environmental externalities are explicitly in the production function. Global dynamical analysis shows that, under some conditions on the parameters, if the initial values of the state variables are close enough to the coordinates of $P^{*}_A$ , then there exists a continuum of equilibrium trajectories approaching $P^{*}_A$ and one trajectory approaching $P^{*}_B$. Therefore, our model exhibits global indeterminacy, since either $P^*_A$ or $P^*_B$ can be selected according to agent expectations.