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Author: | Chang, W-y. Tsai, H-f. Lai, C-c. |
Title: | Anticipated foreign military threat, arms accumulation, and the current account in a small open economy |
Journal: | Journal of International Money and Finance
2002 : DEC, VOL. 21:7, p. 1035-1052 |
Index terms: | ARMAMENTS INDUSTRY DEFENCE INTERNATIONAL RELATIONS OPEN ECONOMY WAR |
Language: | eng |
Abstract: | This paper examines the effects of an anticipated foreign military threat on consumption, the home weapons stock, and net foreign asset position in a small open economy. If the utility function is separable between butter and guns, the economy decreases both butter and guns when the news arrives, accumulates foreign assets prior to the foreign threat realization, and increases guns as the foreign threat realizes. |
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