PAVLOVA, ANNA; RIGOBON, ROBERTO - In: Review of Economic Studies 75 (2008) 4, pp. 1215-1256
We study the comovement among stock prices and exchange rates in a three-good, three-country, Centre-Periphery, dynamic equilibrium model in which the Centre's agents face portfolio constraints. We characterize equilibrium in closed form for a broad class of portfolio constraints, solving for...