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Returns to scale, imperfect competition and aggregate demand and trade policy effects in a two-country model

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  • H. Molana
  • T. Moutos

Abstract

This paper constructs a simple general equilibrium two-country model with flexible exchange rates, specialization in production, and oligopolistic firms. The model is simulated in order to investigate how returns to scale and imperfect competition influence the process through which the aggregate demand and trade policy effects are transmitted internationally. The possibility that aggregate demand and trade policies enacted by one country can have “beggar my neighbor†effects on the other country cannot be excluded. Copyright Kluwer Academic Publishers 1992

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File URL: http://hdl.handle.net/10.1007/BF01886153
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 3 (1992)
Issue (Month): 3 (October)
Pages: 271-295

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Handle: RePEc:kap:openec:v:3:y:1992:i:3:p:271-295

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: imperfect competition; returns to scale; trade policies; flexible exchange rates;

References

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  1. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  2. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
  3. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  5. Neil Bruce & Douglas D. Purvis, 1982. "The Specification and Influence of Goods and Factor Markets in Open Economy Macroeconomic Models," Working Papers 499, Queen's University, Department of Economics.
  6. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
  7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  8. R. Melvin, James & Warne, Robert D., 1973. "Monopoly and the theory of international trade," Journal of International Economics, Elsevier, vol. 3(2), pages 117-134, May.
  9. James R. Melvin, 1969. "Increasing Returns to Scale as a Determinant of Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 2(3), pages 389-402, August.
  10. Argy, Victor & Salop, Joanne, 1983. "Price and Output Effects of Monetary and Fiscal Expansion in a Two-Country World under Flexible Exchange Rates," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 228-46, July.
  11. Hart, Oliver, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 97(1), pages 109-38, February.
  12. Weitzman, Martin L, 1987. "Steady State Unemployment under Profit Sharing," Economic Journal, Royal Economic Society, vol. 97(385), pages 86-105, March.
  13. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
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