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Trade Structure and Equilibrium Indeterminacy in a Two-Country Model

Yunfang Hu and Kazuo Mino ()

No 690, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper explores a dynamic two-country model with production externalities in which capital goods are not traded and international lending and borrowing are allowed. Unlike the integrated world economy model based on the Heckscher-Ohlin setting, our model yields indeterminacy of equilibrium under a wider set of parameter values than in the corresponding closed economy model. Our finding demonstrates that the assumption on trade structure would be a relevant determinant in considering the relation between globalization and economic volatility.

Keywords: two-country model; non-traded goods; equilibrium indeterminacy; social constant returns (search for similar items in EconPapers)
JEL-codes: F43 O41 (search for similar items in EconPapers)
Pages: 34pages
Date: 2009-12
New Economics Papers: this item is included in nep-dge, nep-int and nep-opm
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