Generalized continuous linear model of international trade

Kostenko Elena (), Kuznichenko Volodymyr M. () and Lapshyn Volodymyr I. ()
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Kostenko Elena: Manifest Communications Inc.
Kuznichenko Volodymyr M.: Kharkov Institute of Finance Ukrainian State University of Finance and International Trade
Lapshyn Volodymyr I.: Kharkov Institute of Finance Ukrainian State University of Finance and International Trade

The Problems of Economy, 2014, issue 1, 315_322

Abstract: The probability-based approach to the linear model of international trade based on the theory of Markov processes with continuous time is analysed. A generalized continuous model of international trade is built, in which the transition of the system from state to state is described by linear differential equations. The methodology of how to obtain the intensity matrices, which are differential in nature, is shown, and the same is done for their corresponding transition matrices for processes of purchasing and selling. In the process of the creation of the continuous model, functions and operations of matrices were used in addition to the Laplace transform, which gave the analytical form of the transition matrices, and therefore the expressions for the state vectors of the system. The obtained expressions simplify analysis and calculations in comparison to other methods. The values of the continuous transition matrices include in themselves the results of discrete model of international trade at moments in time proportional to the time step. The continuous model improves the quality of planning and the effectiveness of control of international trade agreements.

Keywords: Markov chains; linear differential equations; z-transform; transform Laplace (search for similar items in EconPapers)
Date: 2014
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