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Financial Market Globalization, Symmetry-Breaking, and Endogenous Inequality of Nations

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  • Kiminori Matsuyama

Abstract

This paper investigates the effects of financial market globalization on the inequality of nations. The world economy consists of inherently identical countries, which differ only in their levels of capital stock. Each country is represented by the standard overlapping generations model, modified only to incorporate credit market imperfection. An integration of financial markets affects the set of stable steady states, as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth-dependent borrowing constraint. The model is tractable enough to allow for a complete characterization of the stable steady states. Copyright The Econometric Society 2004.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2004.00514.x
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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 72 (2004)
Issue (Month): 3 (05)
Pages: 853-884

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Handle: RePEc:ecm:emetrp:v:72:y:2004:i:3:p:853-884

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  10. Kiminori Matsuyama, 1998. "Endogenous Inequality," Discussion Papers 1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
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  16. Kiminori Matsuyama, 2000. "Financial Market Globalization and Endogenous Inequality of Nations," Discussion Papers 1300, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  18. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Gertler, Mark & Rogoff, Kenneth, 1990. "North-South lending and endogenous domestic capital market inefficiencies," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 245-266, October.
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  21. Kiminori Matsuyama, 2002. "Explaining Diversity: Symmetry-Breaking in Complementarity Games," American Economic Review, American Economic Association, vol. 92(2), pages 241-246, May.
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