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By Stephen J. Turnovsky

Monetary development is an argument of fundamental difficulty to coverage makers in either built and constructing economies. subsequently, development thought has lengthy occupied a valuable function in economics. during this booklet, well known progress theorist Stephen J. Turnovsky investigates the method of monetary progress in a small open economic system, exhibiting that it really is delicate to the efficient constitution of the economic climate. The ebook contains 3 elements, starting with versions the place the one intertemporally possible equilibrium is one during which the economic climate is often on its balanced development course. Empirical facts indicates really gradual speeds of convergence so the second one a part of the booklet appears at a number of other ways within which transitional dynamics could be brought. within the 3rd and ultimate half, the writer applies the expansion version to the problem of international relief, focusing particularly on no matter if relief can be untied or tied to the buildup of public capital.

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Extra info for Capital Accumulation and Economic Growth in a Small Open Economy (The CICSE Lectures in Growth and Development)

Example text

E. l ¼ l. With population normalized, the individual 20 2 Basic growth model with fixed labor supply and aggregate production functions are of the pure AK form: Yi ¼ AKir K 1Àr ; Y ¼ AK ð2:9Þ where A  að1 À lÞ1Àr is a fixed constant. With the labor supply fixed, both the marginal and average productivity of capital are constant. 10) is that the equilibrium growth rate of domestic consumption is proportional to the difference between the after-tax rate of return on foreign bonds and the (domestic) rate of time preference.

1 Phase diagram q1 ¼ ½1 þ hrð1 À sb ފ À qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi  Ãffi ½1 þ hrð1 À sb ފ2 À 1 þ 2hArð1 À sy Þ ð2:15aÞ q2 ¼ ½1 þ hrð1 À sb ފ þ qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi  Ãffi ½1 þ hrð1 À sb ފ2 À 1 þ 2hArð1 À sy Þ ð2:15bÞ indicating the potential existence for two steady equilibrium growth rates for capital. Two cases can be identified: Case I: r(1 À sb) > Ar(1 À sy), which implies q2 > 1 > q1 > 0 Case II: r(1 À sb) < Ar(1 À sy), which implies q2 > q1 > 1 In either case it is seen from the phase diagram that the equilibrium point A, which corresponds to the smaller equilibrium value, q1, is an unstable equilibrium, while B, which corresponds to the larger value, q2, is locally stable.

L ¼ l. With population normalized, the individual 20 2 Basic growth model with fixed labor supply and aggregate production functions are of the pure AK form: Yi ¼ AKir K 1Àr ; Y ¼ AK ð2:9Þ where A  að1 À lÞ1Àr is a fixed constant. With the labor supply fixed, both the marginal and average productivity of capital are constant. 10) is that the equilibrium growth rate of domestic consumption is proportional to the difference between the after-tax rate of return on foreign bonds and the (domestic) rate of time preference.

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