Is Openness Good for Stagnation?

Wataru Johdo ()
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Wataru Johdo: Tezukayama University, Postal: Department of Economics, Tezukayama University, 7-1-1, Tezukayama, Nara 631-8501, Japan

Journal of Economic Integration, 2008, vol. 23, 24-41

Abstract:

Using a symmetric multi-country model that allows for the possibility of stagnation, this paper analyzes the effects of openness on effective demand. A regime shift from autarky to free trade boosts the value of consumption utility by expanding the range of consumption goods available to people in every country. However, under stagnation, the rise in value of consumption utility lowers the time preference rate through a decline in the inflation rate, while not affecting the liquidity premium that represents the desire to hold money. Therefore, openness causes realized consumption to decrease and saving to increase. Consequently, effective demand decreases.

Keywords: Autarky; Openness; Effective Demand; Stagnation (search for similar items in EconPapers)
JEL-codes: E24 F15 L11 L13 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0423

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