Munich Personal RePEc Archive

Financial Globalization and Animal Spirits

Kunieda, Takuma and Shibata, Akihisa (2012): Financial Globalization and Animal Spirits.

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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.

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