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.
Kansai University/Kyoto Sangyo University