Currency Prices, the Nominal Exchange Rate, and Security Prices in a Two-Country Dynamic Monetary Equilibrium
AbstractThis paper examines a continuous-time two country dynamic monetary equilibrium in which countries with possible heterogeneous tastes and endowments hold their own money for the purpose of transaction services formulated via the money in the utility function. Given a price system, no-arbitrage pricing results are provided for the price of each money and the nominal exchange rate. Characterizations are provided for equilibrium prices for general time-additive preferences and non-Markovian exogenous processes.
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Bibliographic InfoPaper provided by Wharton School Rodney L. White Center for Financial Research in its series Rodney L. White Center for Financial Research Working Papers with number 9-98.
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Other versions of this item:
- Basak, S. & Gallmeyer, M., 1998. "Currency Prices, the Nominal Exchange Rate, and Security Prices in a Two Country Dynamic Monetary Equilibrium," Weiss Center Working Papers 98-04, Wharton School - Weiss Center for International Financial Research.
- Süleyman Basak & Mike Gallmeyer, . "Currency Prices, the Nominal Exchange Rate, and Security Prices in a Two-Country Dynamic Monetary Equilibrium," Rodney L. White Center for Financial Research Working Papers 09-98, Wharton School Rodney L. White Center for Financial Research.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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- Pavlova, Anna & Rigobon, Roberto, 2011.
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- Suleyman Basak & Hongjun Yan, 2008. "Equilibrium Asset Prices and Investor Behavior in the Presence of Money Illusion," Yale School of Management Working Papers amz2402, Yale School of Management, revised 01 Aug 2009.
- Travis D. Nesmith, 2005. "Solving stochastic money-in-the-utility-function models," Finance and Economics Discussion Series 2005-52, Board of Governors of the Federal Reserve System (U.S.).
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