Growth in a Small Open Economy
M. Benge and
Working Papers from Australian National University - Department of Economics
This paper provides a framework with which to analyse growth in a small economy with perfect capital mobility. It provides a diagrammatic representation of steady states which differs in interesting and important ways from the usual closed-economy Solow-Swan diagram. The paper also analyses model dynamics in response to shocks which perturb the steady state and it is shown that, by contrast to the closed-economy models which underpin much of the cross-section empirical work on income convergence, changes in the saving rate increase both the steady-state level of income and the half-life of income adjustment.
Keywords: GROWTH MODELS; ECONOMIC DEVELOPMENT; CAPITAL MOVEMENTS (search for similar items in EconPapers)
JEL-codes: F41 F43 O41 (search for similar items in EconPapers)
Pages: 27 pages
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Persistent link: https://EconPapers.repec.org/RePEc:fth:aunaec:350
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