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Transitional dynamics, convergence and international capital flows in two-country models of innovation and growth

  • Klaus Waelde

    (Tinbergen Institute)

Global stability properties of dynamic two-country models can be easily studied in the case of international capital flows and simple capital market no-arbitrage conditions. With internationally constant relative productivities, long-run balanced growth path values for factor prices will hold on any equilibrium path unless one country experiences a period of no innovation. Innovation rates converge in the case of perfect international knowledge spillovers but long-run consumption levels and trade patterns are path dependent. The trade balance of the rich country is initially positive but after some time turns into a deficit.

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Paper provided by EconWPA in its series International Trade with number 9403002.

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Date of creation: 24 Mar 1994
Date of revision: 06 Apr 1994
Handle: RePEc:wpa:wuwpit:9403002
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