Optimal growth and competitive equilibrium business cycles under decreasing returns in two-country models

Alain Venditti, Kazuo Nishimura and Makoto Yano

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Abstract: This paper investigates the interlinkage in the business cycles of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model withCobb-Douglas technologies and linear preferences. We also assume decreasing returns in both sectors. We first identify the determinants of each country's accumulation pattern in autarky equilibrium, and second we show how a country's business cycle may spread throughout the world once trade opens. We prove indeed that under free-trade, globalization and market integration may generate a contagion of the capital exporting country's business cycles and thus have destabilizing effects on the capital importing country.

Keywords: Two-country general equilibrium model; busines cycles; capital intensities; decreasing returns (search for similar items in EconPapers)
Date: 2008-05-19
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00280528
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Related works:
Journal Article: Optimal Growth and Competitive Equilibrium Business Cycles under Decreasing Returns in Two‐Country Models* (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00280528

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