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Preference Structure and Volatility in a Financially Integrated World

Kazuo Mino ()

No 08-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper investigates a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to explore the presence of equilibrium indeterminacy in an open-economy setting. In contrast to the existing studies on equilibrium indeterminacy in small-open economies, the present paper demonstrates that opening up international trade and financial interactions between two counties does not necessarily enhance the possibility of indeterminacy of equilibrium. It is shown that the results depend heavily upon not only on the degree of external increasing returns but also on the preference structures.

Keywords: Financial integration; Two-country growth model; Equilibrium determinacy; Preference structure (search for similar items in EconPapers)
JEL-codes: F43 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2008-02
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