Dynamic two-country Heckscher–Ohlin model with externality
type="main" xml:lang="en"> <title type="main">Abstract</title> <p>We extend a dynamic Heckscher–Ohlin model with production externality presented in recent work by Nishimura and Shimomura by assuming a consumable capital good. Following work by Bond, Iwasa, and Nishimura, we define a steady-state excess demand function and derive the locus of home and foreign capital stocks that are consistent with a steady-state equilibrium under free trade. Also, we examine the relationship between externality and local dynamics in autarky or under free trade, which includes a phase diagram analysis. Then we show that opening trade can generate expectation-driven fluctuations in a world trade market. </section>
Year of publication: |
2014
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Authors: | Iwasa, Kazumichi ; Nishimura, Kazuo |
Published in: |
International Journal of Economic Theory. - The International Society for Economic Theory, ISSN 1742-7355. - Vol. 10.2014, 1, p. 53-74
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Publisher: |
The International Society for Economic Theory |
Saved in:
Online Resource
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