Trade, Capital Mobility and Growth in the Two Sector Model

This paper analyzes an intertemporal optimization model of international trade and borrowing in which interactions between the process of capital accu-mulation and the pattern of international trade are more fully analyzed We deal with the effects of trade and factor movement on the long run equilibri-um values of some economic tariables in a two sector model within an optimi-zation framework We also look into the problems related to existence and uniqueness of long run solutions In the specialization of consumption goods case we can get the results that an increase in the relative price of investment goods or the depreciation rate re-duces the steady state equilibrium level of consumption. An increase in the time preference has a lower value of consumption and net assets In addition, an increase in the population growth rate lowers the value of assets. We have also model the comparative dynamic model If the world price rises, the optimal path of asset is shifted down and the stationary level of consumption good could be lower.