Externalities and Price Dynamics

Manjira Datta

Working Papers from Arizona State University, Department of Economics

Abstract: This paper analyzes dynamic movement of outputs and market- clearing when mutually interdependent economies trade. The equilibrium evolution of stocks admit the possibility of monotonic or cyclical behavior, even in the long run. However, the prices eventually reach a steady-state but may exhibit monotonic or oscillating behavior, in the short run. Also we show that higher consumption per unit of stock is associated with a lower productivity or with negative externalities. A stronger preference for the foreign good, increases or decreases consumption depending whether the externality is negative or positive.

Keywords: Externality; international trade (search for similar items in EconPapers)
JEL-codes: C73 D51 D90 F12 (search for similar items in EconPapers)
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Journal Article: Externalities and Price Dynamics (1997)
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