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Equilibrium on International Financial Assets and Goods Marke

Author

Listed:
  • Patrice Fontaine

    (Eurofidai, CERAG, University Pierre-Mendes-France, Grenoble)

  • Cuong Le Van

    () (CNRS, University of Exeter Business School Department of Economics, Paris School of Economicsm)

Abstract

The international asset pricing models are mostly developed in the situation where purchasing power parity (PPP) is not respected. Investors of di erent countries do not agree on expected security real returns. In this case, an equilibrium on the international assets market may exist but not on the international goods market. Our purpose in this paper is to give conditions under which we have equilibrium, not only on the international nancial assets market but also on the international good market. More precisely, we focus on the link between no-arbitrage, equilibrium and PPP. At equilibrium, international nancial assets market must clear and international goods market balance. In particular, equilibrium goods prices will respect the PPP

Suggested Citation

  • Patrice Fontaine & Cuong Le Van, 2010. "Equilibrium on International Financial Assets and Goods Marke," Working Papers 17, Development and Policies Research Center (DEPOCEN), Vietnam.
  • Handle: RePEc:dpc:wpaper:1710
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    File URL: http://depocenwp.org/upload/pubs/CuongLeVan/Equilibrium%20on%20International%20Financial%20Assets%20and%20Goods%20Markets_DEPOCENWP.pdf
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    More about this item

    Keywords

    International Financial Assets and Goods Markets; Exchange Rates; Securities Returns; No-Arbitrage; Covered Interest Rate Parity; Purchasing Power Parity; General Equilibrium.;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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