Can business cycles arise in a two-regional model with fixed exchange rates?

The two-regional five dimensional model describing the development of income, capital stock and money stock, which was introduced by T. Asada in [A Two-regional Model of Business Cycles with Fixed ExchangeRates: A Kaldorian Approach, Discuss. Paper Ser., No. 44, Chuo University, Tokyo, Japan, 2003] is analysed. Sufficient conditions for the existence of one pair of purely imaginary eigenvalues and three eigenvalues with negative real parts in the linear approximation matrix of the model are found. Theorem on the existence of business cycles is presented.