Conditions that guarantee the uniqueness of equilibrium in models of economic competition are crucial to applications of these models in exercises of comparative statics. Until now, most of the attention given to the uniqueness question has been focused on pure exchange economies. In this paper we use a topological index theorem to derive necessary and sufficient conditions for the uniqueness of equilibrium in economies with production. Unfortunately, conditions that imply uniqueness appear to be too restrictive to have much applicability. We argue, for example, that the only economically interpretable restrictions that imply uniqueness are either that the demand side of an economy behaves like a single consumer or that the supply side is an input-output system. Our results suggest a need for reformulation of the comparative statics method.

[Using smooth profit functions to characterize production possibilities, we extend the concepts of regularity and fixed point index to economies with very general technologies, involving both constant and decreasing returns. To prove the genericity of regular economies we rely on an approach taken by Mas-Colell that utilizes the topological concept of transversality. We also generalize the index theorem given by Kehoe. Our results shed new light on the question of when an economy has a unique equilibrium.]

[In this paper we prove a global index theorem for general equilibrium models with activity analysis production technologies. We begin by constructing a single-valued function whose fixed points are equivalent to the equilibria of such a model. We then associate each fixed point with an index that is an integer determined by the local properties of this function at that point. The global index theorem makes a statement about the sum of all the indices of equilibria that implies conditions sufficient for uniqueness of equilibrium.]

Following its opening to trade and foreign investment in the mid-1980s, Mexico's economic growth has been modest at best, particularly in comparison with that of China. Comparing these countries and reviewing the literature, we conclude that the relation between openness and growth is not a simple one. Using standard trade theory, we find that Mexico has gained from trade, and by some measures, more so than China. We sketch out a theory in which developing countries can grow faster than the United States by reforming. As a country becomes richer, this sort of catch-up becomes more difficult. Absent continuing reforms, Chinese growth is likely to slow down sharply, perhaps leaving China at a level less than Mexico's real GDP per working-age person.

This paper compares two different models in a common environment. The first model has liquidity constraints in that consumers save a single asset that they cannot sell short. The second model has debt constraints in that consumers cannot borrow so much that they would want to default, but is otherwise a standard complete markets model. Both models share the features that individuals are unable to completely insure against idiosyncratic shocks and that interest rates are lower than subjective discount rates. In a stochastic environment, the two models have quite different dynamic properties, with the debt constrained model exhibiting simple stochastic steady states, while the liquidity constrained model has greater persistence of shocks.

Does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria? When there is a finite number of infinitely lived agents equilibria are generically determinate. This is not true with overlapping generations of finitely lived agents. We ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path. In this framework there are many economies with isolated equilibria, many with continua of equilibria, and many with no equilibria at all. With two or more goods in every period not only can the price level be indeterminate but relative prices as well. Furthermore, such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are Pareto efficient. THIS PAPER CONSIDERS whether infinite horizon economies have determinate perfect foresight equilibria. This question is of crucial importance. If instead equilibria are locally indeterminate, not only are we unable to make comparative static predictions, but the agents in the model are unable to determine the consequences of unanticipated shocks. The idea underlying perfect foresight is that agents' expectations should be the actual future sequence predicted by the model; if the model does not make determinate predictions, the concept of perfect foresight is meaningless. We consider two extreme cases: the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers, an overlapping generations model. Both are models of stationary pure exchange economies. No production, including the storage of goods between periods, can occur. These models are unrealistic but are the easiest to study. Extensions of the results of this paper to models with production, infinitely lived assets, and mixtures of the two types of consumers are presented by Muller and Woodford [29]. When there is a finite number of infinitely lived consumers, we argue that equilibria are generically determinate. This is because the effective number of equations determining equilibria is not infinite, but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent. Generically, near an equilibrium, these equations are independent and exactly determine the unknowns. When there are infinitely many overlapping generations, this reasoning breaks down: An infinite number of equations is not necessarily sufficient to determine

In January 1995, US President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the eurozone? Our analysis suggests that debt levels are so high that bailouts with penalty interest rates could induce the eurozone governments to default rather than reduce their debt. A resumption of economic growth is one of the few ways that the eurozone crises can end.

We propose a methodology for studying changes in bilateral commodity trade due to goods not exported previously or exported only in small quantities. Using a panel of 1,900 country pairs, we find that increased trade of these “least-traded goods” is an important factor in trade growth. This extensive margin accounts for 10 percent of the growth in trade for NAFTA country pairs, for example, and 26 percent in trade between the United States and Chile, China, and Korea. Looking at country pairs with no major trade policy change or structural change, however, we find little change in the extensive margin.

Why Is Manufacturing Trade Rising Even as Manufacturing Output is Falling? by Raphael Bergoeing, Timothy J. Kehoe, Vanessa Strauss-Kahn and Kei-Mu Yi. Published in volume 94, issue 2, pages 134-138 of American Economic Review, May 2004

Since the early 1990s, as the United States borrowed heavily from the rest of the world, employment in the US goods-producing sector has fallen. We construct a dynamic general equilibrium model with several mechanisms that could generate declining goods-sector employment: foreign borrowing, nonhomothetic preferences, and differential productivity growth across sectors. We find that only 15.1 percent of the decline in goods-sector employment from 1992 to 2012 stems from US trade deficits; most of the decline is due to differential productivity growth. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall.