info:eu-repo/semantics/OpenAccess
Antoine Le Riche, « Macroeconomic Volatility and Trade in OLG Economies », HAL-SHS : économie et finance, ID : 10670/1.8nhxrg
This paper analyzes the effect of free-trade integration on the dynamical properties of economies. We formulate a two-country two-good two-factor overlapping generations model where countries only differ with respect to their discount rate. The main contribution of this paper is to show that opening to international trade may have a destabilizing effect. Especially we prove that, under perfect mobility of labor and capital between countries, sunspot cycles can occur in the trade regime although one country is characterized by saddle-point stability in the autarky regime.