Financial integration and volatility in a two-country world

Mino, Kazuo (2008): Financial integration and volatility in a two-country world.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial integration, Two-country growth model, Equilibrium determinacy, Preference structure
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

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