Financial Integration and Aggregate Stability

Yunfang Hu and Kazuo Mino

No 09-01, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: 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.

Keywords: financial integration; two-country model; equilibrium determinacy; social constant returns (search for similar items in EconPapers)
JEL-codes: F43 O41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2009-01
New Economics Papers: this item is included in nep-cba and nep-opm
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0901

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