A Two-Country Discontinuous General Equilibrium Model

Ciprian Necula

No 23, Advances in Economic and Financial Research - DOFIN Working Paper Series from Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB

Abstract: The aim of this paper is to develop a continuous time general equilibrium model for a two country Lucas type economy. The model assumes that the output in the two countries follows a jump-diffusion stochastic process. We obtain the results concerning the evaluation of financial assets, the determination of the exchange rate, of the interest rate, and of the risk premium in this two-country economy.

Keywords: general equilibrium model; two-country Lucas economy; exchange rate; risk premium; jump-diffusion (search for similar items in EconPapers)
JEL-codes: C02 C61 D50 G12 (search for similar items in EconPapers)
Date: 2008-12
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Persistent link: http://EconPapers.repec.org/RePEc:cab:wpaefr:23

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