Foreign growth and domestic performance in a small open economy

• 成果类型: Article
• 署名作者: Osang, T; Pereira, A
• 署名单位: William & Mary
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(97)00005-6
• 发表日期: 1997
• 页码: 499-512
• 关键词: endogenous growth; Small open economy

摘要

In this paper, we develop a small open economy model of trade with endogenous growth induced by human capital accumulation to analyze the effects of foreign growth on the domestic growth performance. Stronger foreign growth has the potential to increase domestic growth through a change in the terms of trade. For this to happen, the domestic attitude toward saving, as indicated by the intertemporal elasticity of substitution, plays a crucial role. For economies with sufficiently thrifty consumers, changes in the terms of trade generate funds for domestic investment, thereby generating enhanced long term growth. If, however, domestic consumers are less prone to thriftiness, foreign growth may lead to lower domestic output growth. This result suggests that foreign growth is not necessarily a substitute for a weak domestic attitude toward saving.