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Trade structure and belief-driven fluctuations in a global economy

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  • Hu, Yunfang
  • Mino, Kazuo

Abstract

This paper constructs a dynamic two-country model with country-specific production externalities and inspects the presence of equilibrium indeterminacy under alternative trade structures. It is shown that the presence of belief-driven economic fluctuations caused by equilibrium indeterminacy is closely related to the specified trade structure. If investment goods are not internationally traded and international lending and borrowing are allowed, then indeterminacy arises in a wider set of parameter space than in the corresponding closed economy. By contrast, either if both consumption and investment goods are traded in the absence of international lending and borrowing or if only investment goods are traded with financial transactions, then the indeterminacy conditions are the same as those for the closed economy counterpart.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 90 (2013)
Issue (Month): 2 ()
Pages: 414-424

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Handle: RePEc:eee:inecon:v:90:y:2013:i:2:p:414-424

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Two-country model; Non-traded goods; Equilibrium indeterminacy; Social constant returns;

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Citations

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Cited by:
  1. Amano, Daisuke & Mino, Kazuo, 2014. "Trade Structure and Growth Effects of Taxation in a Two-Country World," Discussion paper series. A 273, Graduate School of Economics and Business Administration, Hokkaido University.
  2. Daisuke Amano & Jun-ichi Itaya & Kazuo Mino, 2014. "Trade Structure and Growth Effects of Taxation in a Two-Country World," KIER Working Papers 891, Kyoto University, Institute of Economic Research.
  3. Taketo Kawagishi & Kazuo Mino, 2013. "Time Preference and Income Convergence in a Dynamic Heckscher-Ohlin Model," KIER Working Papers 880, Kyoto University, Institute of Economic Research.
  4. Daisuke Amano & Jun-ichi Itaya & Kazuo Mino, 2014. "Trade Structure and Growth Effects of Taxation in a Two-Country World," CESifo Working Paper Series 4882, CESifo Group Munich.

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