DEPOCEN Working Paper Series
Patrice Fontaine, Cuong Le Van, 2010. "Equilibrium on International Financial Assets and Goods Markets"
The international asset pricing models are mostly developed in the situation where purchasing power parity (PPP) is not respected. Investors of di erent countries do not agree on expected security real returns. 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 nancial assets market but also on the international good market. More precisely, we focus on the link between no-arbitrage, equilibrium and PPP. At equilibrium, international nancial assets market must clear and international goods market balance. In particular, equilibrium goods prices will respect the PPP
View PDF