CAPITAL ACCUMULATION AND CONVERGENCE IN A SMALL OPEN ECONOMY

Outward-oriented economies seem to grow faster than inward-looking ones. Does the literature on convergence have anything to say on this? In the dynamic Heckscher-Ohlin-Samuelson model, with factor-price equalization, there is no convergence of incomes. This is because with identical preferences and return to capital, irrespective of initial levels the growth rates of consumption are the same. In the Specific Factors model, there is factor price equalization in the long run, but incomes depend on endowments of non-accumulable factors. Different specifications for the intersectorally mobile factors have different implications for development (as well as convergence).Convergence, Heckscher-Ohlin Model, Specific Factors Model, Land, Capital Accumulation.

Perfect Competition and the Keynesian Cross:Revisiting Tobin

I look at an exogenous decrease in the desire to save in a two-sector-two-period overlapping generations model, where the consumption good is capital-intensive and the elasticities of substitution in production are "small". It is shown that there is a Keynesian-type multiplier at work, even though the model is a competitive one with full employment (and inelastic labour supply). It is reminiscent of Tobin (1975) who had shown thirty years ago that Keynesian results could be obtained with (short run) Marshallian dynamics (albeit in an ad-hoc model).Overlapping Generations, Two-sector Models, Multiplier, Keynesian Cross.

Non-Uniqueness in the First Generation Balance of Payments Crisis Model

No abstract.

FIXED COSTS, THE BALANCED-BUDGET MULTIPLIER AND WELFARE

In a two-sector model, where one of the sectors is monopolistically competitive and subject to increasing returns to scale but without love for variety, we analyze the effects of a balanced budget fiscal expansion. Such an expansion could increase the welfare of the representative individual, if elasticities of substitution in production and consumption are low. A reorganization of production takes place--increasing returns enabling a rise in real income.New-Keynesian Models, Monopolistic Competition

CAPITAL FLOW VOLATILITY AND EXCHANGE RATES-- THE CASE OF INDIA

This paper examines the relationship between the real exchange rate, level of capital flows, volatility of the flows, fiscal and monetary policy indicators and the current account surplus for the Indian economy for the period 1993Q2 to 2004Q1. The estimations indicate that the variables are cointegrated and each granger causes the real exchange rate. The generalized variance decompositions show that determinants of the real exchange rate, in descending order of importance include net capital inflows and their volatility (jointly), government expenditure, current account surplus and the money supply. A preliminary analysis suggests that a similar analysis can be performed for the foreign exchange reserves held by the RBI.real exchange rate, capital flows, foreign exchange reserves, cointegration,

The Transfer Paradox in a One-Sector Overlapping Generations Model

This paper examines the effects of international income transfers on welfare and capital accumulation in a one-sector overlapping generations model. It is shown that a strong form of the transfer paradox-- in which the donor country experiences a welfare gain while the recipient country experiences a welfare loss—may occur both in and out of steady state. In addition, it is shown that a weak form of the transfer paradox—where either the donor or recipient (but not both) experience paradoxical welfare effects—may characterize all segments of the transition path not already characterized by the strong transfer paradox. The results are explained by the effects of transfers on world capital accumulation and the world interest rate, which imply secondary intertemporal welfare effects large enough to dominate the initial effects of the income transfer.Transfer problem, transfer paradox, dynamics, one-sector overlapping generations model