This paper tests for the martingale (or random walk) hypothesis in the stock prices of a group of Asian countries. The selected countries represent well-developed markets (Hong Kong and Japan) as well as emerging markets (Korea, Taiwan and Thailand). This paper adopts a new joint variance ratio...

This paper examines the impact of trade costs on real exchange rate volatil- ity. We model two channels endogenously in a Ricardian framework: (i) non- tradability and (ii) heterogeneous suppliers of traded goods. The ¯rst channel is examined by constructing a two-country Ricardian model of...

This paper develops a simple two-country, two-good model, in which the real exchange rate, stock and bond prices are jointly determined. The model predicts that stock market prices are correlated internationally even though their dividend processes are independent, providing a theoretical...

This paper examines linkage of real interest rates for a group of selected countries in East Asia. The countries under study include Japan, Korea, Singapore, Malaysia and Thailand. The long run relationship is tested and estimated using the conitegration analysis. We also have conducted the...

The importance of currency and maturity mismatches in the debt structure of emerging markets is an issue that can hardly be overemphasized. Yet, while many papers have explained how imbalances in the asset and liability structure of emerging markets can cause currency and financial crises, the...

A simple two-country model of international trade under uncertainty is considered, where investors choose uncertain projects depending on interest rates, with high rates leading to risky projects. If investment is financed by bond markets, there can be asymmetric equilibria which can be Pareto...

An important puzzle in international macroeconomics is the exchange rate disconnect puzzle. Based on recent empirical literature by Mussa (1986), Baxter and Stockman (1989), and Flood and Rose (1995), high exchange rate volatility under floating rates appear not to be related to the high...

This paper develops a theory of strategic trading in markets with large influential arbitrageurs. If arbitrageurs are not very well-capitalized, margin requirements or capital constraints make their trades predictable. Other market participants can exploit this by trading against them....

This paper develops a theory of strategic trading in markets with large influential arbitrageurs. If arbitrageurs are not very well-capitalized, margin requirements or capital constraints make their trades predictable. Other market participants can exploit this by trading against them....