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Financial Globalization and Animal Spirits

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  • Kunieda, Takuma
  • Shibata, Akihisa

Abstract

Using a multi-country general equilibrium model, we demonstrate that when agents face credit constraints in an international financial market, rational expectations, which are ex-post heterogeneous between countries, cause business fluctuations. If the international financial market becomes perfect, only a unique perfect foresight equilibrium is obtained, implying that no business fluctuations appear.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36123.

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Date of creation: 22 Jan 2012
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Handle: RePEc:pra:mprapa:36123

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Keywords: Business fluctuations; Financial globalization; Sunspots; Heterogeneous agents; Rational expectations;

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  1. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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  10. Yunfang Hu & Kazuo Mino, 2009. "Trade Structure and Equilibrium Indeterminacy in a Two-Country Model," KIER Working Papers 690, Kyoto University, Institute of Economic Research.
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  12. Nishimura, Kazuo & Yano, Makoto, 1993. "Interlinkage in the Endogenous Real Business Cycles of International Economies," Economic Theory, Springer, vol. 3(1), pages 151-68, January.
  13. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  14. Roger E.A. Farmer, 1994. "Indeterminacy and Sector-Specific Externalities," UCLA Economics Working Papers 722, UCLA Department of Economics.
  15. Wright, Mark L. J., 2004. "Global Capital Markets: Integration, Crisis, and Growth. By Maurice Obstfeld and Alan M. Taylor. Cambridge: Cambridge University Press, 2004. Pp. xviii, 354. $65," The Journal of Economic History, Cambridge University Press, vol. 64(04), pages 1151-1153, December.
  16. Krasker, William S., 1984. "Heterogeneous expectations and capital intensity in an overlapping-generations model," Journal of Macroeconomics, Elsevier, vol. 6(4), pages 433-446.
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