Abstract
This paper examines international trade and capital flows within a five-region intertemporal equilibrium model. The paper reports on the use of sequential joint maximization to solve a specific class of AGE (applied general equilibrium) problems — those in which each agent may be characterized by a homothetic utility function.The paper also considers issues related to the formulation of intertemporal AGE models that are focussed upon an individual sector. The balance of the economy is then described in terms of a numéraire good. With either static or recursive models, this form of aggregation seems appropriate. However, with intertemporal AGE models (that is, with dated commodities), difficulties are encountered unless the rate of return is identical in all regions. We explore the implications in terms of international trade and capital flows.
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