GLOBALIZATION, THE VOLATILITY OF INTERMEDIATE GOODS PRICES, AND ECONOMIC GROWTH
Lucas Bretschger and
Thomas Steger ()
Macroeconomic Dynamics, 2013, vol. 17, issue 2, 402-430
We set up a dynamic stochastic model of a stylized economy comprising a final output sector (with traditional and modern firms) and an intermediate goods sector. It is shown that market integration reduces the volatility of the rate of return to capital invested in modern firms. The induced portfolio decisions of households lead to a reallocation of capital from traditional to modern firms. Despite the presence of a reverse precautionary saving channel, the growth rate unambiguously increases because of the reallocation of capital. Empirical estimates for OECD countries support the theoretical results.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)
Working Paper: Globalization, the volatility of intermediate goods prices and economic growth (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:17:y:2013:i:02:p:402-430_00
Access Statistics for this article
More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Keith Waters ().