Patience, Persistence, and Welfare Costs of Incomplete Markets in Open Economies PDF Download
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Languages : en
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The U.S. Federal Reserve Board presents the full text of an article entitled "Patience, Persistence, and Welfare Costs of Incomplete Markets in Open Economies," by Jinill Kim, Sunghyun Henry Kim, and Andrew Levin and published March 2001. The article discusses the welfare implications of alternative financial market structures in a two-country endowment economy model. Results show that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
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Languages : en
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Book Description
The U.S. Federal Reserve Board presents the full text of an article entitled "Patience, Persistence, and Welfare Costs of Incomplete Markets in Open Economies," by Jinill Kim, Sunghyun Henry Kim, and Andrew Levin and published March 2001. The article discusses the welfare implications of alternative financial market structures in a two-country endowment economy model. Results show that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
Author: Jinill Kim
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 40
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Book Description
In this paper, we investigate the welfare implications of alternative financial market structures in a two-country endowment economy model. In particular, we obtain an analytic expression for the expected lifetime utility of the representative household when sovereign bonds are the only internationally traded asset, and we compare this welfare level with that obtained under complete asset markets. The welfare cost of incomplete markets is negligible if agents are very patient and shocks are not very persistent, but this cost is dramatically larger if agents are relatively impatient and shocks are highly persistent. For realistic cases in which agents are very patient and shocks are highly persistent (that is, the discount factor and the first-order autocorrelation are both near unity), the welfare cost of incomplete markets is highly sensitive to the specific values of these parameters. Finally, using a non-linear solution algorithm, we confirm that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
Author: Jinill Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
In this paper, we investigate the welfare implications of alternative financial market structures in a two-country endowment economy model. In particular, we obtain an analytic expression for the expected lifetime utility of the representative household when sovereign bonds are the only internationally traded asset, and we compare this welfare level with that obtained under complete asset markets. The welfare cost of incomplete markets is negligible if agents are very patient and shocks are not very persistent, but this cost is dramatically larger if agents are relatively impatient and shocks are highly persistent. For realistic cases in which agents are very patient and shocks are highly persistent (that is, the discount factor and the first-order autocorrelation are both near unity), the welfare cost of incomplete markets is highly sensitive to the specific values of these parameters. Finally, using a non-linear solution algorithm, we confirm that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
Author: John R. Birge
Publisher: Elsevier
ISBN: 9780080553252
Category : Business & Economics
Languages : en
Pages : 1026
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Book Description
The remarkable growth of financial markets over the past decades has been accompanied by an equally remarkable explosion in financial engineering, the interdisciplinary field focusing on applications of mathematical and statistical modeling and computational technology to problems in the financial services industry. The goals of financial engineering research are to develop empirically realistic stochastic models describing dynamics of financial risk variables, such as asset prices, foreign exchange rates, and interest rates, and to develop analytical, computational and statistical methods and tools to implement the models and employ them to design and evaluate financial products and processes to manage risk and to meet financial goals. This handbook describes the latest developments in this rapidly evolving field in the areas of modeling and pricing financial derivatives, building models of interest rates and credit risk, pricing and hedging in incomplete markets, risk management, and portfolio optimization. Leading researchers in each of these areas provide their perspective on the state of the art in terms of analysis, computation, and practical relevance. The authors describe essential results to date, fundamental methods and tools, as well as new views of the existing literature, opportunities, and challenges for future research.
Author: International Monetary Fund. Research Dept.
Publisher: International Monetary Fund
ISBN: 1589066502
Category : Business & Economics
Languages : en
Pages : 236
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Book Description
Vol. 54, No. 2 includes three notable contributions from the Seventh Jacques Polak Annual Research Conference (ARC) hosted by the IMF in November 2006. Its lead paper, by Olivier Blanchard of Harvard University, is the 2006 Mundell-Fleming Lecture (delivered at the ARC), which analyzes current-account deficits in the advanced economies. Other papers in this issue look at the relationship between international financial integration and the real economy. Other papers discuss whether (or not): i) the next capital account crisis can be predicted; ii) accepted definitions of debt crises are adequate; iii) the Doha Round of trade talks (if they are ever successfully completed) will lead to preference erosion; and finally iv) there is room for political opportunism in countries deciding between money-based or exchange-rate-based stabilization programs.
Author:
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ISBN:
Category :
Languages : en
Pages : 974
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Book Description
Author: Jinill Kim
Publisher:
ISBN:
Category : Taxation
Languages : en
Pages : 50
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Book Description
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498329837
Category : Business & Economics
Languages : en
Pages : 87
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Book Description
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Author: Michael I. C. Nwogugu
Publisher: Springer
ISBN: 113744701X
Category : Business & Economics
Languages : en
Pages : 696
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Book Description
Indices, index funds and ETFs are grossly inaccurate and inefficient and affect more than €120 trillion worth of securities, debts and commodities worldwide. This book analyzes the mathematical/statistical biases, misrepresentations, recursiveness, nonlinear risk and homomorphisms inherent in equity, debt, risk-adjusted, options-based, CDS and commodity indices – and by extension, associated index funds and ETFs. The book characterizes the “Popular-Index Ecosystems,” a phenomenon that provides artificial price-support for financial instruments, and can cause systemic risk, financial instability, earnings management and inflation. The book explains why indices and strategic alliances invalidate Third-Generation Prospect Theory (PT3), related approaches and most theories of Intertemporal Asset Pricing. This book introduces three new decision models, and some new types of indices that are more efficient than existing stock/bond indices. The book explains why the Mean-Variance framework, the Put-Call Parity theorem, ICAPM/CAPM, the Sharpe Ratio, Treynor Ratio, Jensen’s Alpha, the Information Ratio, and DEA-Based Performance Measures are wrong. Leveraged/inverse ETFs and synthetic ETFs are misleading and inaccurate and non-legislative methods that reduce index arbitrage and ETF arbitrage are introduced.
Author: Harry Huizinga
Publisher: Cambridge University Press
ISBN: 9780521852951
Category : Business & Economics
Languages : en
Pages : 384
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Book Description
A thorough investigation of financial market integration in Europe.
