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Trade Openness and Investment Instability / Assaf Razin, Efraim Sadka, Tarek Coury.
- Format:
- Book
- Author/Creator:
- Razin, Assaf.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w8827.
- NBER working paper series no. w8827
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2002.
- Summary:
- In the presence of lumpy investment cost of adjustment, globalization may have non-conventional effects on the level of investment and its cyclical behavior. Trade openness may lead to a discrete 'jump' in the level of investment, as it may trigger a discrete change in the terms of trade. Such a shift creates a sizeable boost in aggregate investment. But trade openness may also lead to boom-bust cycles of investment (namely, multiple equilibrium) supported by self-validating expectations. In this sense globalization destabilizes the economy. There can be substantial gains from globalization in the investment-boom equilibrium. However, gains could be small, or negative, in the investment-bust equilibrium.
- Notes:
- Print version record
- March 2002.
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