Transition to Equilibrium in International Trades

Gaël Giraud and Céline Rochon ()
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Céline Rochon: Saïd Business School - University of Oxford

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: Building on Giraud & Tsomocos (2009), we develop a model of non equilibrium international trades with incomplete markets. Trades occur in continuous time, both on international and domestic markets. Traders are assumed to exhibit locally rational expectations on future prices, interest rates and exchange rates. Although currencies turn out to be non-neutral, if their stock grows sufficiently rapidly and if agents can trade assets during a sufficiently long period, the world economy converges in probability towards some interim constrained efficient state. Moreover, a random localized version of the Quantity Theory of Money holds provided the economy is not trapped in a liquidity hole. The traditional theory of comparative advantages, however, turns out to be challenged by international capital mobility

Keywords: Currency; cash; liquidity; monetary policy; money; international trade; quantity theory of money; transition to equilibrium (search for similar items in EconPapers)
JEL-codes: E5 E6 F1 F2 F3 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-01
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http://mse.univ-paris1.fr/pub/mse/CES2010/10012.pdf (application/pdf)

Related works:
Working Paper: Transition to Equilibrium in International Trades (2010)
Working Paper: Transition to Equilibrium in International Trades (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:10012

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