Is Openness Good for Stagnation?
AbstractUsing a symmetric multi-country model that allows for the possibility of stagnation, this paper analyzes the effects of openness on effective demand. A regime shift from autarky to free trade boosts the value of consumption utility by expanding the range of consumption goods available to people in every country. However, under stagnation, the rise in value of consumption utility lowers the time preference rate through a decline in the inflation rate, while not affecting the liquidity premium that represents the desire to hold money. Therefore, openness causes realized consumption to decrease and saving to increase. Consequently, effective demand decreases.
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Bibliographic InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 23 (2008)
Issue (Month): ()
Autarky; Openness; Effective Demand; Stagnation;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- F15 - International Economics - - Trade - - - Economic Integration
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Ryu‐ichiro Murota & Yoshiyasu Ono, 2012.
"Zero Nominal Interest Rates, Unemployment, Excess Reserves And Deflation In A Liquidity Trap,"
Wiley Blackwell, vol. 63(2), pages 335-357, 05.
- Ryu-ichiro Murota & Yoshiyasu Ono, 2009. "Zero Nominal Interest Rates, Unemployment, Excess Reserves and Deflation in a Liquidity Trap," ISER Discussion Paper 0748, Institute of Social and Economic Research, Osaka University.
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