Indeterminacy in the free-trade world


We show that indeterminacy arises nadiscrete-time competitive two-country dynamic model of international trade in which externalities, imperfect competition, public goods, and government intervention are assumed away. The present model is a standard dynamic trade model in the sense that there is neither an international credit market nor international factor mobility, and these intrinsic features are a source of indeterminacy. Indeterminacy is implied by the condition for the existence of a steady state.

Acknowledgement1 We are grateful to Satya Das, Kazuo Mino, and Stephen J. Turnovsky for their insightful comments and suggestions.

Junko DOI
Kansai University/Kyoto Sangyo University

Kazumichi IWASA
Kobe University

Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059