Asset prices and creation in a global economy

Shengxing Zhang and Keyu Jin
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Shengxing Zhang: London School of Economics
Keyu Jin: London School of Economics

No 1253, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We analyze a two country stochastic open-economy framework in which countries differ in their ability to create liquid assets. We examine the consequences of this asymmetry on international asset prices and asset creation. Higher volatility, financial integration of emerging markets drive up the liquidity premium of assets created in advanced economies, and also stimulate the latter's production of liquid assets. Financial development (innovation) in advanced economies, on the other hand, also drive up the liquidity premium of these assets, and boost growth in both economies.

Date: 2015
New Economics Papers: this item is included in nep-dge and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:1253

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