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Two-country Model (two-country + model)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting75%

Selected Abstracts

STRATEGIC RESEARCH AND DEVELOPMENT POLICY: SOCIETAL OBJECTIVES AND THE CORPORATE WELFARE ARGUMENT

CONTEMPORARY ECONOMIC POLICY, Issue 1 2009
RICHARD T. GRETZ
The article considers the optimal research and development subsidy regime in a two-firm two-country model where each firm is "located" in a specific country. Trade is intra-industry in that customers in both countries purchase from both firms. The article suggests that when both countries subsidize their local firm usually welfare increases compared to the case of zero subsidies. Making the same comparison, profit always falls in the symmetric game and falls about half the time in the asymmetric game. These results call into question some common notions about corporate welfare. (JEL O38, H25, F23) [source]

Time preference and two-country trade

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2008
Been-Lon Chen
F11; E20; H20 We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher,Ohlin theorem such that the labor-abundant country exports the labor-intensive good. [source]

Monetary Policies in the Presence of Asymmetries

JCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 4 2000
Paul De Grauwe
In this article we study the theory of monetary policy when the monetary authority faces asymmetries in the countries constituting the monetary union. We identify two asymmetries (shocks and transmission) in the context of a two-country model. A general finding is that, as the degree of asymmetries increases, the effectiveness of stabilization of output and unemployment is reduced. As a result, when asymmetries increase, the stabilization effort of the central bank declines for given preferences about stabilization. We also find that the central bank can improve the efficiency of its monetary policies when asymmetries in the transmission exist, by using national information in the setting of optimal policies. The declared strategy of the ECB conflicts with this prescription. However, in practice the ECB is likely to follow this prescription. [source]

Monetary Policy and Stock Prices in an Open Economy

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 8 2007
GIORGIO DI GIORGIO
monetary policy; stock prices; Taylor Rule; open-economy DSGE models; wealth effects This paper studies monetary policy in a two-country model where agents can invest their wealth in both stock and bond markets. In our economy the foreign country hosts the only active equity market where also residents of the home country can trade stocks of listed foreign firms. We show that, in order to achieve price stability, the Central Banks in both countries should grant a dedicated response to movements in stock prices driven by relative productivity shocks. Determinacy of rational expectations equilibria and approximation of the Wicksellian interest rate policy by simple monetary policy rules are also investigated. [source]