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Endogenous Fluctuations In Two‐Country Models

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  • KAZUO NISHIMURA
  • ALAIN VENDITTI
  • MAKOTO YANO

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 with Cobb‐Douglas technologies and linear preferences. We also assume decreasing returns to scale in the consumption good sector. We first identify the determinants of each country's global accumulation pattern in autarky equilibrium, and secondly we show how a country's business cycles may spread throughout the world once trade opens. We thus give capital intensity conditions for local and global stability of competitive equilibrium paths.

Suggested Citation

  • Kazuo Nishimura & Alain Venditti & Makoto Yano, 2006. "Endogenous Fluctuations In Two‐Country Models," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 516-532, December.
    • Handle: RePEc:bla:jecrev:v:57:y:2006:i:4:p:516-532
    DOI: 10.1111/j.1468-5876.2006.00401.x
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    Cited by:

    1. Kazuo Nishimura & Alain Venditti & Makoto Yano, 2010. "Expectation‐driven fluctuations and welfare loss under free trade in two‐country models," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 97-125, March.
    2. Kazuo Nishimura & Alain Venditti & Makoto Yano, 2014. "Destabilization effect of international trade in a perfect foresight dynamic general equilibrium model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(2), pages 357-392, February.
    3. repec:bla:reviec:v:17:y:2009:i:si:p:371-391 is not listed on IDEAS
    4. Nicholas C. S. Sim & Kong‐Weng Ho, 2007. "Autarkic indeterminacy and trade determinacy," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(4), pages 315-328, December.
    5. Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics.
    6. Freni, Giuseppe, 2016. "Back to the Sixties: A Note on Multi-Primary-Factor Linear Models with Homogeneous Capital," MPRA Paper 73677, University Library of Munich, Germany.
    7. Atsumasa Kondo & Koji Kitaura, 2012. "International linkage of inflation rates in a dynamic general equilibrium," Journal of Economics, Springer, vol. 107(2), pages 141-155, October.

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