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Financial Globalization and Animal Spirits

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  • Kunieda, Takuma
  • Shibata, Akihisa

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.

Suggested Citation

  • Kunieda, Takuma & Shibata, Akihisa, 2012. "Financial Globalization and Animal Spirits," MPRA Paper 36123, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36123
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    References listed on IDEAS

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    More about this item

    Keywords

    Business fluctuations; Financial globalization; Sunspots; Heterogeneous agents; Rational expectations;
    All these keywords.

    JEL classification:

    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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