This paper provides a framework with which to analyse growth in a small economy with perfect capital mobility. It provides a diagrammatic representation of steady states which differs in interesting and important ways from the usual closed-economy Solow-Swan diagram. The paper also analyses model dynamics in response to shocks which perturb the steady state and it is shown that, by contrast to the closed-economy models which underpin much of the cross-section empirical work on income convergence, changes in the saving rate increase both the steady-state level of income and the half-life of income adjustment.
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Paper provided by Australian National University - Department of Economics in its series Papers with number
350.
Length: 27 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:aunaec:350
Contact details of provider: Postal: THE AUSTRALIAN NATIONAL UNIVERSITY, DEPARTMENT OF ECONOMICS, RESEARCH SCHOOL of PACIFIC STUDIES, RESEARCH SCHOOL OF SOCIAL SCIENCES, G.P.O. 4, CANBERRA ACT 2601 AUSTRALIA..O. BOX 4 CANBERRA 2601 AUSTRALIA. Web page: http://economics.anu.edu.au/economics.htm More information through EDIRC
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Find related papers by JEL classification: F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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