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Trade structure and belief-driven fluctuations in a global economy

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  • Hu, Yunfang
  • Mino, Kazuo

Abstract

This paper constructs a dynamic two-country model with country-specific production externalities and inspects the presence of equilibrium indeterminacy under alternative trade structures. It is shown that the presence of belief-driven economic fluctuations caused by equilibrium indeterminacy is closely related to the specified trade structure. If investment goods are not internationally traded and international lending and borrowing are allowed, then indeterminacy arises in a wider set of parameter space than in the corresponding closed economy. By contrast, either if both consumption and investment goods are traded in the absence of international lending and borrowing or if only investment goods are traded with financial transactions, then the indeterminacy conditions are the same as those for the closed economy counterpart.

Suggested Citation

  • Hu, Yunfang & Mino, Kazuo, 2013. "Trade structure and belief-driven fluctuations in a global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 414-424.
  • Handle: RePEc:eee:inecon:v:90:y:2013:i:2:p:414-424
    DOI: 10.1016/j.jinteco.2012.12.003
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    Cited by:

    1. Taketo Kawagishi & Kazuo Mino, 2016. "Time Preference and Income Convergence in a Dynamic Heckscher–Ohlin Model," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 592-603, August.
    2. Antoine Le Riche, 2016. "Macroeconomic Volatility and Trade in OLG Economies," Working Papers halshs-01079773, HAL.
    3. Daisuke Amano & Jun-ichi Itaya & Kazuo Mino, 2014. "Trade Structure and Growth Effects of Taxation in a Two-Country World," CESifo Working Paper Series 4882, CESifo Group Munich.
    4. Been-Lon Chen & Yunfang Hu & Kazuo Mino, 2016. "Stabilization Effects of Taxation Rules in Small-Open Economies with Endogenous Growth," KIER Working Papers 946, Kyoto University, Institute of Economic Research.
    5. Antoine Le Riche, 2014. "Macroeconomic Volatility and Trade in OLG Economies," AMSE Working Papers 1446, Aix-Marseille School of Economics, Marseille, France, revised Nov 2014.
    6. repec:bla:ijethy:v:13:y:2017:i:4:p:401-425 is not listed on IDEAS
    7. Keiichi Morimoto & Takeo Hori & Noritaka Maebayashi & Koichi Futagami, 2013. "Fiscal Sustainability, Macroeconomic Stability, and Welfare under Fiscal Discipline in a Small Open Economy," Discussion Papers in Economics and Business 13-07, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

    More about this item

    Keywords

    Two-country model; Non-traded goods; Equilibrium indeterminacy; Social constant returns;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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