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Financial Globalization and Animal Spirits

  • Kunieda, Takuma
  • Shibata, Akihisa

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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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
Date of revision:
Handle: RePEc:pra:mprapa:36123
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  1. 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.
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  8. Benhabib, Jess & Nishimura, Kazuo, 1996. "Indeterminancy and Sunspots with Constant Returns," Working Papers 96-44, C.V. Starr Center for Applied Economics, New York University.
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  11. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  12. Philippe Aghion & Abhijit Banerjee & Thomas Piketty, 1999. "Dualism And Macroeconomic Volatility," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1359-1397, November.
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  14. Krasker, William S., 1984. "Heterogeneous expectations and capital intensity in an overlapping-generations model," Journal of Macroeconomics, Elsevier, vol. 6(4), pages 433-446.
  15. Aghion, Philippe & Banerjee, Abhijit, 2005. "Volatility and Growth," OUP Catalogue, Oxford University Press, number 9780199248612.
  16. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
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  18. 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.
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