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An Empirical Test on Harrod’s Open Economy Dynamics

Author

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  • Giuseppe Orlando

    (Department of Economics and Finance, Università degli Studi di Bari “Aldo Moro”, Via C. Rosalba 53, I-70124 Bari, Italy
    School of Science and Technologies, Università degli Studi di Camerino, Madonna delle Carceri 9, I-62032 Camerino, Italy)

  • Fabio Della Rossa

    (Department of Electronics, Information and Bioengineering, Politecnico di Milano, Piazza Leonardo da Vinci 32, I-20133 Milano, Italy
    Department of Electrical Engineering and Information Technologies, University of Naples Federico II, 80125 Naples, Italy)

Abstract

This paper has the objective to empirically test Harrod’s explanations of economic dynamics addressing both growth and business cycles. In particular we test Harrod’s speculation that opening the economy to foreign trade could lead to a reduction of cyclical instability. The main variables determining the dynamic behaviour are wealth, savings, competitiveness and, therefore, balance of trade. The behaviour of the model under scrutiny is highly non-linear and the conclusion is that stable cycles are possible only under particular conditions. In fact, this empirical test shows a stable long-run pattern for those specific parameters.

Suggested Citation

  • Giuseppe Orlando & Fabio Della Rossa, 2019. "An Empirical Test on Harrod’s Open Economy Dynamics," Mathematics, MDPI, vol. 7(6), pages 1-13, June.
    • Handle: RePEc:gam:jmathe:v:7:y:2019:i:6:p:524-:d:238351
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    References listed on IDEAS

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