Optimal Growth and Competitive Equilibrium Business Cycles under Decreasing Returns in Two-Country Models
AbstractThis paper investigates the interlinkage in the business cycles of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general-equilibrium model with Cobb-Douglas technologies and linear preferences. We also assume decreasing returns in both sectors. We first identify the determinants of each country's accumulation pattern in autarky equilibrium, and secondly we show how a country's business cycle may spread throughout the world once trade opens. We prove indeed that under free trade, globalization and market integration may generate a contagion of the capital-exporting country's business cycles and thus have destabilizing effects on the capital-importing country. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 17 (2009)
Issue (Month): SI (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
Other versions of this item:
- Alain Venditti & Kazuo Nishimura & Makoto Yano, 2008. "Optimal growth and competitive equilibrium business cycles under decreasing returns in two-country models," Working Papers halshs-00280528, HAL.
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- Kazuo Nishimura & Alain Venditti & Makoto Yano, 2013.
"Destabilization Effect of International Trade in a Perfect Foresight Dynamic General Equilibrium Model,"
AMSE Working Papers
1313, Aix-Marseille School of Economics, Marseille, France, revised Feb 2013.
- Kazuo Nishimura & Alain Venditti & Makoto Yano, 2014. "Destabilization effect of international trade in a perfect foresight dynamic general equilibrium model," Economic Theory, Springer, Springer, vol. 55(2), pages 357-392, February.
- Kazuo Nishimura & Alain Venditti & Makoto Yano, 2013. "Destabilization Effect of International Trade in a Perfect Foresight Dynamic General Equilibrium Model," Working Papers halshs-00796692, HAL.
- Atsumasa Kondo & Koji Kitaura, 2012. "International linkage of inflation rates in a dynamic general equilibrium," Journal of Economics, Springer, Springer, vol. 107(2), pages 141-155, October.
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