Preference Structure and Volatility in a Financially Integrated World [chapter]

Kazuo Mino
International Trade and Economic Dynamics  
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
more » ... lity 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.
doi:10.1007/978-3-540-78676-4_23 fatcat:rwfnha2u7fhpzpr5jynuzr3exm