Destabilization Effect of International Trade in a Perfect Foresight Dynamic General Equilibrium Model

Kazuo Nishimura, Alain Venditti and Makoto Yano

No 1313, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: In the present paper, we consider a two-country, two-good, two-factor general equilibrium model with CIES non-linear preferences, asymmetric technologies across countries and decreasing returns to scale. It is shown that aggregate instability and endogenous fluctuations may occur due to international trade. In particular, we prove that the integration into a common market on which countries trade the produced good and the capital input may lead to period-two cycles even when the closed-economy equilibrium is saddle-point stable in both countries.

Keywords: Perfect foresight dynamic general equilibrium model; international trade; aggregate instability; endogenous fluctuations; non-linear preferences (search for similar items in EconPapers)
JEL-codes: C62 E32 F11 F43 O41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013-03, Revised 2013-02
New Economics Papers: this item is included in nep-dge and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2013_-_nr_13.pdf (application/pdf)

Related works:
Journal Article: Destabilization effect of international trade in a perfect foresight dynamic general equilibrium model (2014)
Working Paper: Destabilization effect of international trade in a perfect foresight dynamic general equilibrium model (2014)
Working Paper: Destabilization Effect of International Trade in a Perfect Foresight Dynamic General Equilibrium Model (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1313

Access Statistics for this paper

More papers in AMSE Working Papers from Aix-Marseille School of Economics, France AMU-AMSE - 5-9 Boulevard Maurice Bourdet, CS 50498 - 13205 Marseille Cedex 1. Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().