Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098980 | Journal of Economic Dynamics and Control | 2012 | 15 Pages |
Abstract
Using a two-good, two-country model, we examine macroeconomic adjustment by allowing for decreasing and increasing marginal impatience (DMI and IMI). In the reference case where both countries have IMI, a negative output shock in one country lowers the interest rate and both countries' welfare levels in steady state, whereas, when either one country has DMI, the negative income shock raises the interest rate, thereby benefiting the IMI country and harming the DMI one in steady state. In a country either with IMI or DMI, the Harberger-Laursen-Metzler effect takes place if negative 'welfare-supporting' effects dominate positive 'income-compensating' effects.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Ken-Ichi Hirose, Shinsuke Ikeda,