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Financial Globalization and Animal Spirits

Takuma Kunieda and Akihisa Shibata

MPRA Paper from University Library of Munich, Germany

Abstract: Using a multi-country general equilibrium model, we demonstrate that when agents face credit constraints in an international financial market, rational expectations, which are ex-post heterogeneous between countries, cause business fluctuations. If the international financial market becomes perfect, only a unique perfect foresight equilibrium is obtained, implying that no business fluctuations appear.

Keywords: Business fluctuations; Financial globalization; Sunspots; Heterogeneous agents; Rational expectations (search for similar items in EconPapers)
JEL-codes: E44 F36 F49 (search for similar items in EconPapers)
Date: 2012-01-22
New Economics Papers: this item is included in nep-cba and nep-opm
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