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The Foreign Trade Accelerator and the International Transmission of Growth

Hans Brems

Abstract

Two economies with different propensities to save but the same overall capital coefficients are considered under a number of alternative degrees of dependence upon foreign sources for the supply of producers' goods. Based upon a closed dynamic linear model in 52 variables, the exercise is intended to show that, where the assumptions made permit of a well-defined equilibrium path,the two economies will eventually grow at the same proportionate rate despite their different potentialities. Under assumptions which make this common rate of growth rather close to the one prevailing in the high-saving economy considered in isolation, the gross national product of the low-saving economy will settle down to a small fraction of the gross national product of the high-saving economy.