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The Dependent-Economy Model with Both Traded and Nontraded Capital Goods

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Author Info
Brock, Philip L
Turnovsky, Stephen J

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Abstract

Dynamic versions of the dependent-economy model have been criticized for arbitrarily assuming that capital is either tradable or nontradable, and for choosing either the traded or nontraded sector to be capital intensive. Our model incorporates both types of capital and shows that the relative sectoral intensity of nontraded capital determines the dynamic adjustment of the relative price of nontradables. When the traded sector is intensive in nontraded capital, the saddlepath is flat. When the nontraded sector is intensive in nontraded capital, the saddlepath is negatively sloped. The relative sectoral intensity of traded capital primarily affects current-account dynamics. Copyright 1994 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 2 (1994)
Issue (Month): 3 (October)
Pages: 306-25
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Handle: RePEc:bla:reviec:v:2:y:1994:i:3:p:306-25

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Turnovsky Stephen J. & Sen Partha, 1995. "Investment in a Two-Sector Dependent Economy," Journal of the Japanese and International Economies, Elsevier, vol. 9(1), pages 29-55, March. [Downloadable!] (restricted)
  2. Sen, P. & Turnovsky, S.J., 1990. "Investment Tax Credit In An Open Economy," Working Papers 90-09, University of Washington, Department of Economics.
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  3. Krueger, Anne O, 1969. "Balance-of-Payments Theory," Journal of Economic Literature, American Economic Association, vol. 7(1), pages 1-26, March. [Downloadable!] (restricted)
  4. Dornbusch, Rudi, 1996. "The Effectiveness of Exchange-Rate Changes," Oxford Review of Economic Policy, Oxford University Press, vol. 12(3), pages 26-38, Autumn.
  5. Stephen J. Turnovsky, 1991. "Tariffs and Sectoral Adjustments in an Open Economy," NBER Working Papers 3315, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Alan J. Auerbach & James R. Hines Jr., 1988. "Anticipated Tax Changes and the Timing of Investment," NBER Working Papers 1886, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Oppenheimer, Peter M, 1974. "Non-traded Goods and the Balance of Payments: A Historical Note," Journal of Economic Literature, American Economic Association, vol. 12(3), pages 882-88, September. [Downloadable!] (restricted)
  8. Svensson, Lars E O, 1982. " Comment on M. Bruno, "Adjustment and Structural Change under Supply Shocks."," Scandinavian Journal of Economics, Blackwell Publishing, vol. 84(2), pages 223-27.
  9. Fischer, Stanley & Frenkel, Jacob A., 1972. "Investment, the two-sector model and trade in debt and capital goods," Journal of International Economics, Elsevier, vol. 2(3), pages 211-233, August. [Downloadable!] (restricted)
  10. Maurice Obstfeld & Alan C. Stockman, 1985. "Exchange-Rate Dynamics," NBER Working Papers 1230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Bevan, D.L. & Collier, P. & Gunning, J.W., 1990. "Temporary Trade Shocks And Dynamic Adjustment," Economics Series Working Papers 9993, University of Oxford, Department of Economics.
  12. Neary, J Peter & Purvis, Douglas D, 1982. " Sectoral Shocks in a Dependent Economy: Long-run Adjustment and Short-run Accommodation," Scandinavian Journal of Economics, Blackwell Publishing, vol. 84(2), pages 229-53.
  13. Bruno, Michael, 1982. " Adjustment and Structural Change under Supply Shocks," Scandinavian Journal of Economics, Blackwell Publishing, vol. 84(2), pages 199-221.
  14. Rudiger Dornbusch, 1983. "Real Interest Rates, Home Goods, and Optimal External Borrowing," NBER Working Papers 0779, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Murphy, Robert G., 1986. "Productivity shocks, non-traded goods and optimal capital accumulation," European Economic Review, Elsevier, vol. 30(5), pages 1081-1095, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Charles Engel, 1995. "Accounting for U.S. Real Exchange Rate Changes," NBER Working Papers 5394, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Christoph Fischer, 2004. "Real currency appreciation in accession countries: Balassa-Samuelson and investment demand," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(2), pages 179-210, June. [Downloadable!] (restricted)
    Other versions:
  3. Meng, Q. & Velasco, A., 1999. "Can Capital Mobility be Destabilizing?," Working Papers 99-16, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  4. Qinglai Meng & Andres Velasco, 1999. "Can Capital Mobility be Destabilizing?," NBER Working Papers 7263, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Tomas Holub & Martin Cihak, 2003. "Price Convergence: What Can the Balassa-Samuelson Model Tell Us?," Working Papers 2003/08, Czech National Bank, Research Department. [Downloadable!]
  6. Charles Engel & Chang-Jin Kim, 1996. "The Long-Run U.S./U.K. Real Exchange Rate," NBER Working Papers 5777, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Valerie Cerra & Serpil Tekin & Stephen Turnovsky, 2009. "Foreign Transfers and Real Exchange Rate Adjustments in a Financially Constrained Dependent Economy," Open Economies Review, Springer, vol. 20(2), pages 147-181, April. [Downloadable!] (restricted)
  8. Javier Coto-Martinez & Huw Dixon, . "Fiscal Policy in an Imperfectly Competitive Dynamic Small Open Economy," Discussion Papers 99/19, Department of Economics, University of York. [Downloadable!]
  9. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," EconomiX Working Papers 2008-9, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  10. Cristina Arellano & Aleš Bulir & Timothy D. Lane & Leslie Lipschitz, 2005. "The Dynamic Implications of Foreign Aid and Its Variability," IMF Working Papers 05/119, International Monetary Fund. [Downloadable!]
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  11. Rudolfs Bems, 2008. "Aggregate Investment Expenditures on Tradable and Nontradable Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 852-883, October. [Downloadable!] (restricted)
    Other versions:
  12. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," Working Papers 0803, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  13. Vladimir Klyuev, 2004. "Imperfect Capital Mobility in an Open Economy Model of Capital Accumulation," IMF Working Papers 04/31, International Monetary Fund. [Downloadable!]
    Other versions:
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