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Macroeconomic Dynamics in a Multi-country Economy: A Dynamic Optimization Approach

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  • Ikeda, Shinsuke
  • Ono, Yoshiyasu

Abstract

Using a multicountry model with perfect-foresight dynamic optimization by infinitely-lived households, the authors analyze the dynamics of macroeconomic nonmonetary and monetary variables. The authors show that the most patient country initially accumulates foreign debt but eventually decumulates this debt and becomes a creditor. It monotonically increases its consumption and experiences monotonic price and exchange-rate appreciation. The moderately-patient country initially accumulates foreign assets but eventually decumulates them, and becomes a debtor. Its consumption also follows a humped path. The least patient country monotonically decumulates foreign assets, lowers its consumption, and experiences rising inflation and exchange-rate depreciation. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 33 (1992)
Issue (Month): 3 (August)
Pages: 629-44

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Handle: RePEc:ier:iecrev:v:33:y:1992:i:3:p:629-44

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Cited by:
  1. Wei-Bin Zhang, 2014. "National and International Inequalities in Income and Wealth in a Global Growth with Free Trade and National Inflation Policies," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(1), pages 22-40, May.
  2. Momota, Akira & Futagami, Koichi, 2005. "Demographic structure, international lending and borrowing in growing interdependent economies," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 135-162, March.
  3. Wei-Bin Zhang, 2008. "Leisure, amenity, and capital accumulation in a multi-region model," The Annals of Regional Science, Springer, Springer, vol. 42(1), pages 183-207, March.
  4. Wei-Bin Zhang, 2011. "Interregional economic growth with transportation and residential distribution," The Annals of Regional Science, Springer, Springer, vol. 46(1), pages 219-245, February.
  5. Yoshiyasu Ono & Akihisa Shibata, 2006. "Capital Income Taxation and Specialization Patterns: Investment Tax vs. Saving Tax," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0649, Institute of Social and Economic Research, Osaka University.
  6. Wei-Bin Zhang, 2011. "Global Economic Growth, Elastic Labor Supply, Knowledge Utilization And Creation With Learning-By-Doing," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 497-512, november.
  7. Ikeda, Shinsuke & Gombi, Ichiro, 2009. "Habit Formation In An Interdependent World Economy," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(04), pages 477-492, September.
  8. Wei-Bin Zhang, 1995. "Leisure time, savings and trade patterns A two-country growth model," Economic Modelling, Elsevier, vol. 12(4), pages 425-434, October.
  9. Nishimura, Kazuo & Ohyama, Michihiro, 1995. "External debt cycles," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 6(2), pages 215-236, June.
  10. Yoshiyasu Ono & Shinsuke Ikeda, 1996. "Fiscal policy, wealth divergence, and lifetime utility," Journal of Economics, Springer, Springer, vol. 64(3), pages 265-280, October.

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