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Accumulation and Growth in a Two-Country Model: A Simulation Approach

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  • David Lipton
  • Jeffrey Sachs
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    Abstract

    This paper analyzes saving and capital accumulation in a two-good growth model of two market economies in which economic agents optimize with perfect foresight. The goal is to present a model in which short-run dynamics and the steady-state are soundly integrated. We stress the importance of asset markets as the linkage that transmits disturbances both internationally and intertemporally. While many components of the model described below can be found in the literature on optimal consumption, investment and international growth models, we provide a consistent synthesis. Our framework permits the analysis of structural adjustment in the global economy, and the dynamic effects of a wide range of public policies.

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    File URL: http://www.nber.org/papers/w0572.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0572.

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    Date of creation: Oct 1980
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    Publication status: published as with D. Lipton, Journal of International Economics, 15(1/2), 135-159 August 1983
    Handle: RePEc:nbr:nberwo:0572

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    References

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    1. Jeffrey D. Sachs, 1980. "Energy and Growth under Flexible Exchange Rates: A Simulation Study," NBER Working Papers 0582, National Bureau of Economic Research, Inc.
    2. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    3. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 769-97, August.
    4. Fischer, Stanley & Frenkel, Jacob A., 1972. "Investment, the two-sector model and trade in debt and capital goods," Journal of International Economics, Elsevier, Elsevier, vol. 2(3), pages 211-233, August.
    5. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 321.
    6. Fischer, Stanley & Frenkel, Jacob A, 1974. "Interest Rate Equalization and Patterns of Production, Trade and Consumption in a Two-country Growth Model," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 50(132), pages 555-80, December.
    7. Ruffin, Roy J, 1979. "Growth and the Long-Run Theory of International Capital Movements," American Economic Review, American Economic Association, American Economic Association, vol. 69(5), pages 832-42, December.
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    Cited by:
    1. Alan J. Auerbach & Lawrence Kotlikoff, 1980. "National Savings, Economic Welfare, and the Structure of Taxation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 570, Cowles Foundation for Research in Economics, Yale University.
    2. William H. Branson, 1981. "The OPEC Surplus and U.S.-LDC Trade," NBER Working Papers 0791, National Bureau of Economic Research, Inc.
    3. Lars E.O. Svensson, 1982. "Oil Prices, Welfare and the Trade Balance: An Intertemporal Approach," NBER Working Papers 0991, National Bureau of Economic Research, Inc.
    4. Laurence J. Kotlikoff & Edward E. Leamer & Jeffrey Sachs, 1981. "The International Economics of Transitional Growth: The Case of the United States," NBER Working Papers 0773, National Bureau of Economic Research, Inc.

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