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Virtual Trade and Growth

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  • Marjit, Sugata

Abstract

The purpose of this paper is to propose a model where trade has a direct and positive impact on growth rate of two trading nations beyond the level effect. We use the idea of virtual trade in intermediates induced by non- overlapping time zones and show how trade can increase the equilibrium optimal rate of growth. In this structure the trade impact goes beyond the level effect and directly causes growth. Typically standard models of trade cannot generate an automatic growth impact. Virtual trade may allow production to continue for 24x7 in separated time zones such as between US and India and that can lead to higher growth for both countries. Later we extend the model to incorporate accumulation of skill which becomes necessary for sustaining steady state growth.

Suggested Citation

  • Marjit, Sugata, 2014. "Virtual Trade and Growth," MPRA Paper 60831, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60831
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    References listed on IDEAS

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    More about this item

    Keywords

    International Trade; Time Zone; Growth;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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