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  • -

    42 -

APPENDIX

[ ] [ ] 1 1 1 4 1 1 3 1 1 3 0 1 3 1 1 3 1 1 1 3 1 0 1 3 1sm 0 1 1 2 1 1 1 1 0 1 / l o g i p i S m i s m i s m i s m S s i s h s h i s h s h i s h i i i i i A A A H K a d i 1sm s t C β µ β µ β γ β γ β µ β γ β γ β β β β + + + + + + + =

1 5 i β +

0 1 l o g H K R

( 1 3 1 E i s h β =

1 3 F i s h γ β +

1sh 2

1 3 1 3 F i s m i s m γ β β + +

1sm 2

) 1 4 F i β +

13

( 6 8 ) 1 1 1 * 1 E p C i e P a t i = µ

( * 3 1 * 2 1 * 1 1 P a t P a t P a t P a t + + +

* US1

)E

1

+ + + P a t P a t P a t P a t * 3 1 * 2 1 * 1 1

* US1

=

E p C e i 1 1 1 µ

( + + + P a t P a t P a t P a t * 3 1 * 2 1 * 1 1

* US1

)E

1

i

  • 0

    = log⎜⎝ i

( * 3 1 * 2 1 * 1 1 1 1 1 1 l o g ) 1 ( l o g p i P a t P a t P a t P a t E E C + + + + µ

* US1

)

( + + + P a t P a t P a t P a t * 3 1 * 2 1 * 1 1 l o g

* US1

) ( ) = p E 1 1 1 l o g E1 1 µ

i

Ci1

( 6 9 ) * 3 1 * 2 1 * 1 1 + + + P a t P a t P a t P a t

* US1

1 = E1 p µ

i

Ci1

( ) 1 1 E

1

Substituting (69) in (43) and finally in (66) completes the analysis of the steady state solutions.

Stability Analysis

We are now ready to analyse of the dynamic properties of the model. This can be done by studying the equations of motion of the endogenous variables expressed in terms of the difference (xk) between actual and steady state values. This will be done, as usual, for country 1.

(70) x1 = log

t Y e Y Y 1 * 1 1 µ

13

This term is constant for all i by virtue of the equality constraints imposed on coefficients.

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