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Financial Integration and Aggregate Stability

  • Yunfang Hu

    ()

    (Graduate School of International Cultural Studies, Tohoku University)

  • Kazuo Mino

    ()

    (Graduate School of Economics, Osaka University)

This paper explores a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to investigate equilibrium determinacy (aggregate stability) conditions in a financially integrated world economy. We show that the well-established equilibrium determinacy conditions for the case of small-open economy are still valid if heterogeneity between two countries is small enough. As the technological difference between the countries increases, the equilibrium determinacy conditions may diverge from those for the small country setting.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0901.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-01.

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Length: 41 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:osk:wpaper:0901
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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  7. Weder, Mark, 2001. "Indeterminacy in a Small Open Economy Ramsey Growth Model," Journal of Economic Theory, Elsevier, vol. 98(2), pages 339-356, June.
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  17. Kazuo Nishimura & Koji Shimomura, 2006. "Indeterminacy in a dynamic two-country model," Economic Theory, Springer, vol. 29(2), pages 307-324, October.
  18. Jess Benhabib & Qinglai Meng & Kazuo Nishimura, 2000. "Indeterminacy under Constant Returns to Scale in Multisector Economies," Econometrica, Econometric Society, vol. 68(6), pages 1541-1548, November.
  19. Yan Zhang, 2008. "Does the Utility Function Form Matter for Indeterminacy in a Two Sector Small Open Economy," Annals of Economics and Finance, Society for AEF, vol. 9(1), pages 91-101, May.
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