Abstract

This paper analyzes the simplest neoclassical economy in which agents have finite lives and there is sustained per capita growth. The growth rate of the world economy depends upon countries’ savings propensities and common technology. Trade can reverse an economy’s autarkic growth trajectory, and a country with a high savings rate runs a current account surplus. If a surplus country expands aggregate demand while a deficit country contracts analogously, world growth increases. An appropriate international policy can change the path of the world economy from stagnation to growth.

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Economics

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Economics Commons

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URL: http://digitalcommons.calpoly.edu/econ_fac/45