17 , 2015-05 , Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University
This study examines growth cycles in a simple discrete-time two-country model of innovation. In this setting, we find that there are two key driving forces that give rise to cycles. They are perfect international capital mobility and perfect international knowledge spillovers. In addition, this study shows that the opening of trade can create cycles in both countries, whereas pretrade equilibrium in each country initially jumps to the steady state. That is, our results are characteristic of an open-economy framework.