Appendix
The partial derivatives of the first dynamic equation of the system (equation 9) are given by;
where,
The partial derivatives for the second dynamic equation (equation 12) are;
ϕ0 = 0
ϕ1 = α < 0
ϕ3 = 0
ϕ4 = 0
For the competitive solution:
where,
ϕ2 < 0 for σ > 1/2
ϕ2 = 0 for σ1/2
ϕ2 > 0 for σ < 1/2
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The author would like to thank Richard E. Baldwin, Graciana del Castillo, Ronald Findlay, Mohsin S. Khan, Peter Montiel, Robert A. Mundell, and Vincent R. Reinhart for useful suggestions. All remaining errors are the responsibility of the author.
Also see Stockman and Obstfeld (1983).