Multiplicity and Stability of Equilibrium in Trade Models with Durable Goods

Eric Bond and Robert Driskill

A chapter in International Trade and Economic Dynamics, 2009, pp 281-297 from Springer

Abstract: We examine dynamic stability in Shimomura's durable-goods model of trade when there are multiple steady-state equilibria. In the case we examine, there are three such equilibria, corresponding to the three equilibria in Marshall's famous “shoelace” diagram. The two extreme equilibria are always characterized by sad-dlepath stability. The interior equilibrium may be a source, a sink, or a center, depending on the value of the intertemporal elasticity of substitution. Finally, we show that there is a unique equilibrium that is the limit of the equilibrium of a finite-horizon version of the model as the horizon goes to infinity.

Keywords: Durable Good; Equilibrium Path; Interior Equilibrium; Trade Model; Multiple Steady State (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-78676-4_21

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DOI: 10.1007/978-3-540-78676-4_21

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