Working Paper: NBER ID: w2230
Authors: Sven W. Arndt; J. David Richardson
Abstract: This paper integrates the contributions to a forthcoming volume of the same title by the authors. The volume analyzes and empirically examines linkages between the real and financial variables that themselves link open economies-- "linkage" thus has a double meaning. Two types of linkages are discussed. Structural linkages describe differences across economies and among sectors in market structure (competitive/oligopolistic), productivity growth, and openness to trade. Inter-temporal linkages describe differences across economies and over time or circumstance in saving preferences and capital formation, government budgets, portfolio shares of "inside" and "outside" assets, and openness to mobile financial flows. Structural linkages are important chiefly for explaining sustained divergences in national competitiveness as measured by purchasing-power-parity norms. Inter-temporal linkages also account for them, as well as for sustained divergences in current and capital-account positions, geographical growth rates, and national incomes of residents.
Keywords: International Economics; Trade; Finance; Competitiveness
JEL Codes: F2; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structural linkages (Y80) | national competitiveness (F23) |
| differences in market structure and productivity growth (L11) | national competitiveness (F23) |
| intertemporal linkages (D15) | divergences in competitiveness (F12) |
| differences in saving preferences and capital formation (E21) | divergences in competitiveness (F12) |
| structural differences (F12) | variations in national income and growth rates (F40) |
| imperfectly competitive market structures (L13) | divergences from the law of one price (F16) |
| exchange rate changes (F31) | influence on relative prices (F16) |