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Financial Integration and Aggregate Stability

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  • Yunfang Hu

    (Graduate School of International Cultural Studies, Tohoku University)

  • Kazuo Mino

    (Graduate School of Economics, Osaka University)

Abstract

This paper explores a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to investigate equilibrium determinacy (aggregate stability) conditions in a financially integrated world economy. We show that the well-established equilibrium determinacy conditions for the case of small-open economy are still valid if heterogeneity between two countries is small enough. As the technological difference between the countries increases, the equilibrium determinacy conditions may diverge from those for the small country setting.

Suggested Citation

  • Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0901
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    References listed on IDEAS

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    Cited by:

    1. Daisuke Amano & Jun-ichi Itaya & Kazuo Mino, 2014. "Trade Structure and Growth Effects of Taxation in a Two-Country World," CESifo Working Paper Series 4882, CESifo.

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    More about this item

    Keywords

    financial integration; two-country model; equilibrium determinacy; social constant returns;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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