The finding of Feldstein and Horioka (1980) that domestic saving and domestic investment are highly correlated across countries despite the rapid globalization and liberalization of financial markets in recent decades has been regarded as a Puzzle or Paradox. However, in this paper, we show that...

Global warming is a serious and acute threat to our planet, but, when negotiating the allocation of permissible carbon emissions, conflicts of interest exist between developed and developing countries. Developing countries insist that global warming is the result of prolonged pollution emissions...

In a two-country model with habit formation, we focus on interdependent macroeconomic adjustments to global and country-specific income shocks.Global habits and habit differentials play key roles in the global equilibrium dynamics, possibly nonmonotonic, and in the determination of international...

Unless free international lending/borrowing is allowed, domestic saving equals domestic investment and hence saving and investment taxes have the identical effect, as is the case in a closed-economy context. However, if it is allowed, households can accumulate foreign assets besides domestic...

In the theory of endogenous time preference, one of the most common and most controversial assumptions is that the degree of impatience, measured by the rate of time preference, is increasing in wealth. Although this empirically-unjustified assumption often helps ease dynamic analyses by...

This research is the first to examine dynamic general equilibrium in a growing two-country economy under decreasing marginal impatience (DMI). The stability condition is shown to be more restrictive than in the case of an endowment economy and/or under increasing marginal impatience (IMI). By...

Economic interdependence of heterogeneous habit forming consumers is examined by using a two-country model. Due to endogenous interest rate adjustments, consumption-habit dynamics in one country are affected by the other country's habits and preferences. To characterize the interactive dynamics,...

Incorporating weakly nonseparable preferences into the familiar time-preference model, we emphasize a role of steady-state welfare changes in determining the effect of permanent tariffs on the current account. The effect consists of: a welfare effect, due to steady-state welfare changes, which...

Regionalism is taking two forms. It is occurring firstly through free trade arrangements and secondly through monetary arrangements. In this paper, we highlight the issues related to the reversal of sequence between trade integration (free trade agreement) and monetary integration (a monetary...

External capital inflow on a massive scale into the emerging market economies is a very significant phenomenon of recent years. Making distinctions between direct investment, real and financial, and portfolio investment and incorporating crowding in or crowding out effects we derive some results...