Financial Globalization and Animal Spirits

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

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Business fluctuations; Financial globalization; Sunspots; Heterogeneous agents; Rational expectations
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F49 - Other; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration

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