Working Paper: NBER ID: w0572
Authors: David Lipton; Jeffrey Sachs
Abstract: This paper analyzes saving and capital accumulation in a two-good growth model of two market economies in which economic agents optimize with perfect foresight. The goal is to present a model in which short-run dynamics and the steady-state are soundly integrated. We stress the importance of asset markets as the linkage that transmits disturbances both internationally and intertemporally. While many components of the model described below can be found in the literature on optimal consumption, investment and international growth models, we provide a consistent synthesis. Our framework permits the analysis of structural adjustment in the global economy, and the dynamic effects of a wide range of public policies.
Keywords: saving; capital accumulation; two-good growth model; international economics
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher asset prices (G19) | Increased investment and consumption (E20) |
| Capital accumulation processes (E22) | Economic growth (O49) |
| Changes in one economy's fiscal policy (E62) | Direct effects on capital accumulation and growth in another economy (F62) |