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Equilibrium existence in the international asset and good markets

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  • Stefano Bosi

    (EPEE, University of Evry)

  • Patrice Fontaine

    (Euro?dai, CERAG, University Pierre-Mendes-France, Grenoble)

  • Cuong Le Van

    (CNRS, Hanoi WRU, VCREME)

Abstract

The international asset pricing models are mostly developed in the case of parity failure (investors of di?erent countries do not agree on the expected returns on securities). In this case, an equilibrium in the international asset markets may exist, but not in the international good markets. In our paper, we prove the existence of an equilibrium in both the asset and the good markets. We focus also on the links between parities, no-arbitrage conditions and the general equilibrium. We show that no-arbitrage conditions for international asset and good markets are necessary and sufficient to an equilibrium in both the markets.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 16.

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Length: 26 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:dpc:wpaper:1613

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Keywords: International asset pricing; Returns on securities; Exchange rates; No-arbitrage conditions; PPP; UIRP; General equilibrium;

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References

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  1. Dana, Rose-Anne & Le Van, Cuong & Magnien, François, 1999. "On the Different Notions of Arbitrage and Existence of Equilibrium," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6228, Paris Dauphine University.
  2. Frenkel, Jacob A & Mussa, Michael L, 1980. "The Efficiency of Foreign Exchange Markets and Measures of Turbulence," American Economic Review, American Economic Association, American Economic Association, vol. 70(2), pages 374-81, May.
  3. Hart, Oliver D., 1974. "On the existence of equilibrium in a securities model," Journal of Economic Theory, Elsevier, Elsevier, vol. 9(3), pages 293-311, November.
  4. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 55(6), pages 1403-18, November.
  5. Rose-Anne Dana & Cuong Le Van, 2007. "Overlapping sets of priors and the existence of efficient allocations and equilibria for risk measures," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00188761, HAL.
  6. Allouch, Nizar & Le Van, Cuong & Page, Jr. Frank H., 2001. "The geometry of arbitrage and the existence of competitive equilibrium," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 598, University of Warwick, Department of Economics.
  7. Dumas, Bernard, 1992. "Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated World," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 5(2), pages 153-80.
  8. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, Elsevier, vol. 8(4), pages 500-524, August.
  9. repec:hal:journl:halshs-00308530 is not listed on IDEAS
  10. Jacob A. Frenkel & Michael L. Mussa, 1980. "Efficiency of Foreign Exchange Markets and Measures of Turbulence," NBER Working Papers 0476, National Bureau of Economic Research, Inc.
  11. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 34(2), pages 647-668, June.
  12. Page, Frank Jr., 1987. "On equilibrium in Hart's securities exchange model," Journal of Economic Theory, Elsevier, Elsevier, vol. 41(2), pages 392-404, April.
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Cited by:
  1. Stefano Bosi & Patrice Fontaine & Cuong Le Van, 2014. "Pareto optima and exchange rates under risk neutrality: A note," Working Papers, Department of Research, Ipag Business School 2014-101, Department of Research, Ipag Business School.
  2. Furkan Emirmahmutoglu & Nicholas Apergis & Beatrice D. Simo-Kengne & Tsangyao Chang & Rangan Gupta, 2014. "Causal relationship between asset prices and output in the US: Evidence from state-level panel Granger causality test," Working Papers, Department of Research, Ipag Business School 2014-466, Department of Research, Ipag Business School.

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