Global Entropy

Abstract

The recent fiscal crisis in the EU and the slow-down of the BRICS countries have raised world-wide concerns about future global growth prospects. We examine the role of doubts about both local and foreign economic shocks by constructing an international endogenous growth model with technology diffusion across countries. In this setting, endogenous technology spillovers generate global growth shocks. When agents have concerns for robustness, country-specific shocks (1) alter global entropy, and (2) generate long-term contagion.

Keywords: Global Growth, Entropy, Contagion

JEL Classification: C62, F31, E62, G1, H2, H3