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Dynamic conditions for smooth convergence in the Ricardo–Mill model under commitment of trade and continuum of goods

Espinosa, Alexandra M. (2013): Dynamic conditions for smooth convergence in the Ricardo–Mill model under commitment of trade and continuum of goods.

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Abstract

Under general conditions, it has been proved that free trade improves the welfare of open economies. However, the conditions to attain the free trade equilibrium are non trivial: when the productive process is planned, industries do not know the price that will prevail, while the production is not available in the world markets, generating a “general price uncertainty” due to the time–consuming nature of productive process. Consequently, additional assumptions is required to construct the time path driving economies from the autarky to the free trade. Thus, we assume commitment of trade and continuum of goods with the aim of handle with such a problems. This paper finds the general conditions for a smooth time path stable, monotonic and that guarantees a successful process of liberalization.

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