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International cross-holdings of bonds in a two-good DSGE model

Listed author(s):
  • Amdur, David

I solve for equilibrium portfolios in a two-country, two-good dynamic stochastic general equilibrium (DSGE) model where the only traded assets are locally-denominated real bonds. Unless the elasticity of substitution between goods is exceptionally low, the model predicts that each country will hold a short position in foreign bonds.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165-1765(10)00177-1
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 2 (August)
Pages: 163-166

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:163-166
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Charles Engel & Akito Matsumoto, 2009. "The International Diversification Puzzle When Goods Prices Are Sticky: It's Really about Exchange-Rate Hedging, Not Equity Portfolios," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 155-188, July.
  2. Coeurdacier, Nicolas, 2009. "Do trade costs in goods market lead to home bias in equities?," Journal of International Economics, Elsevier, vol. 77(1), pages 86-100, February.
  3. Anna Pavlova & Roberto Rigobon, 2007. "Asset Prices and Exchange Rates," Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1139-1180.
  4. Nicolas Coeurdacier & Robert Kollmann & Philippe Martin, 2009. "International Portfolios with Supply, Demand and Redistributive Shocks," NBER Chapters,in: NBER International Seminar on Macroeconomics 2007, pages 231-263 National Bureau of Economic Research, Inc.
  5. Lane, Philip R. & Shambaugh, Jay C., 2010. "The long or short of it: Determinants of foreign currency exposure in external balance sheets," Journal of International Economics, Elsevier, vol. 80(1), pages 33-44, January.
  6. Coeurdacier, Nicolas & Gourinchas, Pierre-Olivier, 2016. "When bonds matter: Home bias in goods and assets," Journal of Monetary Economics, Elsevier, vol. 82(C), pages 119-137.
  7. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-180, March.
  8. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
  9. Kollmann, Robert, 2006. "International Portfolio Equilibrium and the Current Account," CEPR Discussion Papers 5512, C.E.P.R. Discussion Papers.
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