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Optimal growth and competitive equilibrium business cycles under decreasing returns in two-country models

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Author Info

  • Alain Venditti

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Kazuo Nishimura

    ()
    (Kyoto University - Kyoto University)

  • Makoto Yano

    ()
    (Kyoto University - Kyoto University)

Abstract

This paper investigates the interlinkage in the business cycles of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model withCobb-Douglas technologies and linear preferences. We also assume decreasing returns in both sectors. We first identify the determinants of each country's accumulation pattern in autarky equilibrium, and second we show how a country's business cycle may spread throughout the world once trade opens. We prove indeed that under free-trade, globalization and market integration may generate a contagion of the capital exporting country's business cycles and thus have destabilizing effects on the capital importing country.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00280528.

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Date of creation: 19 May 2008
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Handle: RePEc:hal:wpaper:halshs-00280528

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00280528/en/
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Related research

Keywords: Two-country general equilibrium model; busines cycles; capital intensities; decreasing returns;

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Cited by:
  1. Kazuo Nishimura & Alain Venditti & Makoto Yano, 2013. "Destabilization Effect of International Trade in a Perfect Foresight Dynamic General Equilibrium Model," Working Papers halshs-00796692, HAL.
  2. Atsumasa Kondo & Koji Kitaura, 2012. "International linkage of inflation rates in a dynamic general equilibrium," Journal of Economics, Springer, vol. 107(2), pages 141-155, October.

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