Macroeconomic volatility and trade in OLG economies

Riche, Antoine Le

doi:10.1111/ijet.12134

Int J of Economic Theory

2017

DOI: 10.1111/ijet.12134

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Macroeconomic volatility and trade in OLG economies

Antoine Le Riche

Abstract: 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 up to international trade may have a destabilizing effect. In particular, we prove that, under perfect mobility of labor and capital between countries, sunspot cycles can occur in the trade regime although one co… Show more

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Cited by 3 publications

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References 25 publications

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“…88The theoretical literature has identified many economic causes of destabilization. For instance, Le Riche (2017) points out that free trade can generate endogenous business cycles.…”

mentioning

confidence: 99%

Pollution effects on disease transmission and economic stability

Bosi

Desmarchelier

2019

Int J of Economic Theory

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In this article, we embed a model of disease spread into a Ramsey model. A stock of pollution, viewed as a productive externality, affects both the disease transmission and the consumption demand. An eco-friendly government levies a proportional Pigouvian tax on production to depollute. We show the coexistence of two steady states in the long run: a disease-free and an endemic steady state. At the endemic steady state, a higher green-tax rate always reduces the pollution level. In the short run, we show the existence of limit cycles (through a Hopf bifurcation) as well as more complex dynamics of codimension two (a Gavrilov-Guckenheimer bifurcation). We complete the study with a numerical illustration of these bifurcations and a new facet of the Green Paradox: a higher tax rate can allow more scope for cycles by lowering the critical aversion to pollution and, thus, contribute to destabilization of the economy and promotion of the intergenerational inequalities.

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“…88The theoretical literature has identified many economic causes of destabilization. For instance, Le Riche (2017) points out that free trade can generate endogenous business cycles.…”

mentioning

confidence: 99%

Pollution effects on disease transmission and economic stability

Bosi

Desmarchelier

2019

Int J of Economic Theory

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Intra-industry trade, involuntary unemployment and macroeconomic stability

Riche

Lloyd‐Braga

Modesto

2022

Journal of Mathematical Economics

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The Instability of Open Pareto Efficient Economies

Riche

2020

Macroecon. Dynam.

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This paper analyzes the impact of trade on the stability properties of trading countries and on stationary welfare. We consider a two-country two-good two-factor overlapping generations model where countries differ in terms of their technology. In the autarky equilibrium and the free-trade equilibrium, indeterminacy relies, under dynamic efficiency, on a capital intensive consumption good and intermediate values of the elasticity of intertemporal substitution in consumption. Opening the borders to trade can be a source of a global destabilizing effect. Indeed, considering a free-trade equilibrium in which one country is an exporter of the consumption good and the other country is an exporter of the investment good, indeterminacy can occur with trade even though the two countries are determinate in autarky. Finally, opening to trade increases the stationary welfare of the country that exports the investment good and deteriorates the one of the other country.

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Macroeconomic volatility and trade in OLG economies

Cited by 3 publications

References 25 publications

Pollution effects on disease transmission and economic stability

Pollution effects on disease transmission and economic stability

Intra-industry trade, involuntary unemployment and macroeconomic stability

The Instability of Open Pareto Efficient Economies

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