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Preference Structure and Volatility in a Financially Integrated World

Author

Listed:
  • Kazuo Mino

    (Graduate School of Economics, Osaka University)

Abstract
This paper investigates a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to explore the presence of equilibrium indeterminacy in an open-economy setting. In contrast to the existing studies on equilibrium indeterminacy in small-open economies, the present paper demonstrates that opening up international trade and financial interactions between two counties does not necessarily enhance the possibility of indeterminacy of equilibrium. It is shown that the results depend heavily upon not only on the degree of external increasing returns but also on the preference structures.

Suggested Citation

  • Kazuo Mino, 2008. "Preference Structure and Volatility in a Financially Integrated World," Discussion Papers in Economics and Business 08-05, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0805
    as

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0805.pdf
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    References listed on IDEAS

    as
    1. Luís Francisco Aguiar-Conraria & Yi Wen, 2004. "Foreign Trade and Equilibrium Indeterminacy," NIPE Working Papers 5/2004, NIPE - Universidade do Minho.
    2. Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-854, November.
    3. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, April.
    4. Mino, Kazuo, 2008. "Financial integration and volatility in a two-country world," MPRA Paper 16953, University Library of Munich, Germany.
    5. Wen, Yi, 2001. "Understanding self-fulfilling rational expectations equilibria in real business cycle models," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1221-1240, August.
    6. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864, Elsevier.
    7. Kazuo Nishimura & Koji Shimomura, 2012. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 347-361, Springer.
    8. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, April.
    9. Weder, Mark, 2001. "Indeterminacy in a Small Open Economy Ramsey Growth Model," Journal of Economic Theory, Elsevier, vol. 98(2), pages 339-356, June.
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    11. Christian Ghiglino & Marielle Olszak-Duquenne, 2005. "On The Impact Of Heterogeneity On Indeterminacy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 171-188, February.
    12. Roger E. A. Farmer & Amartya Lahiri, 2005. "A Two-Country Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 68-88, January.
    13. Nishimura, Kazuo & Shimomura, Koji, 2002. "Indeterminacy in a dynamic small open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 271-281, December.
    14. Mino, Kazuo, 2001. "Indeterminacy and Endogenous Growth with Social Constant Returns," Journal of Economic Theory, Elsevier, vol. 97(1), pages 203-222, March.
    15. Roger E. A. Farmer & Amartya Lahiri, 2006. "Economic Growth in an Interdependent World Economy," Economic Journal, Royal Economic Society, vol. 116(514), pages 969-990, October.
    16. Kazuo Nishimura & Koji Shimomura, 2006. "Indeterminacy in a dynamic two-country model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 307-324, October.
    17. Meng, Qinglai & Velasco, Andres, 2004. "Market imperfections and the instability of open economies," Journal of International Economics, Elsevier, vol. 64(2), pages 503-519, December.
    18. Qinglai Meng & Andrés Velasco, 2003. "Indeterminacy in a small open economy with endogenous labor supply," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(3), pages 661-669, October.
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    Citations

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    Cited by:

    1. Yunfang Hu & Kazuo Mino, 2011. "Globalization and Volatility under Alternative Trade Structures," KIER Working Papers 791, Kyoto University, Institute of Economic Research.
    2. Hu, Yunfang & Mino, Kazuo, 2013. "Trade structure and belief-driven fluctuations in a global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 414-424.
    3. Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics.

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    More about this item

    Keywords

    Financial integration; Two-country growth model; Equilibrium determinacy; Preference structure;
    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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