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Trade Structure and Equilibrium Indeterminacy in a Two-Country Model

Author

Listed:
  • Yunfang Hu

    (Graduate School of International Cultural Studies, Tohoku University)

  • Kazuo Mino

    (Institute of Economic Research, Kyoto University)

Abstract

This paper explores a dynamic two-country model with production externalities in which capital goods are not traded and international lending and borrowing are allowed. Unlike the integrated world economy model based on the Heckscher-Ohlin setting, our model yields indeterminacy of equilibrium under a wider set of parameter values than in the corresponding closed economy model. Our finding demonstrates that the assumption on trade structure would be a relevant determinant in considering the relation between globalization and economic volatility.

Suggested Citation

  • 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.
  • Handle: RePEc:kyo:wpaper:690
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP690.pdf
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    Cited by:

    1. Kunieda, Takuma & Shibata, Akihisa, 2012. "Financial Globalization and Animal Spirits," MPRA Paper 36123, University Library of Munich, Germany.

    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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