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Equilibrium on International Assets and Goods Markets

Author

Listed:
  • Patrice Fontaine

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UPMF - Université Pierre Mendès France - Grenoble 2 - CNRS - Centre National de la Recherche Scientifique)

  • Cuong Le Van

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, University of Exeter Business School - University of Exeter)

Abstract

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.

Suggested Citation

  • Patrice Fontaine & Cuong Le Van, 2010. "Equilibrium on International Assets and Goods Markets," Post-Print halshs-00523364, HAL.
    • Handle: RePEc:hal:journl:halshs-00523364
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00523364
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    References listed on IDEAS

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    1. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
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    4. Hart, Oliver D., 1974. "On the existence of equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 9(3), pages 293-311, November.
    5. Rose-Anne Dana & Cuong Le Van, 2008. "No-arbitrage, overlapping sets of priors and the existence of efficient allocations and equilibria in the presence of risk and ambiguity," Documents de travail du Centre d'Economie de la Sorbonne b08039, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Nov 2009.
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