The Dynamics of a Small Open Economy in a Ricardian Model with a Market for Land under Equilibrium Expectations

Carlo Beretta
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Carlo Beretta: Universita' Cattolica di Milano

Rivista Internazionale di Scienze Sociali, 2007, vol. 115, issue 1, 29-47

Abstract: Each country produces just one good, corn, by means of corn, labour and land. Capitalists allocate their funds between corn production and the purchase of land so as to equalise the rate of profit on these activities under equilibrium expectations. Autarky in natural equilibrium is briefly discussed. Opening the economy allows capitalists to invest either domestically or abroad. In the small country case, equilibrium expectations make the economy very unstable. Under most circumstances, the economy will register an inflow of capital, which can be employed productively only in the short run, if at all, and thereafter will translate in speculation in land, followed by a balance of payments crisis and collapse on this market.

Keywords: Dynamic of a Small Open Economy; Market for land in a Ricardian model; Factor movements in a model of trade (search for similar items in EconPapers)
JEL-codes: F2 O4 (search for similar items in EconPapers)
Date: 2007
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