Intertemporal Capital Costs Ensure Stable Economic Growth in Two-Sector Model.
The study shows that adding intertemporal capital adjustment costs to a two-sector real business cycle model can make the steady state determinate, even with sector-specific externalities. This means that the economy's long-term behavior can be predicted more accurately. The researchers found that when it is costly to adjust each sector's capital, the steady state is even more likely to be determinate across a wider range of parameter values.