Equilibrium on international assets and goods
Most of the international asset pricing models are developed in the situation where purchasing power parity (PPP) is not respected. Investors of different countries do not agree on expected security returns. However, 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 assets markets but also on the international good market. More precisely, we focus on the link between no-arbitrage, equilibrium and PPP. At equilibrium, assets markets must clear and international goods market balance. In particular, equilibrium goods prices respect the PPP.
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