Recent evidence on the importance of cross-border equity flows calls for a rethinking of the standard theory of external adjustment. We introduce equity holdings and portfolio choice into an otherwise conventional open-economy dynamic equilibrium model. Our model is simple and admits an exact...

We study the comovement among stock prices and among exchange rates in a three-good three-country Center-Periphery dynamic equilibrium model in which the Center's agents face portfolio constraints. We characterize equilibrium in closed form for a broad class of portfolio constraints, solving for...

In this paper we study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model. Trade in goods gives rise to an additional channel of international propagation - through the terms of trade - absent in traditional single-good...

We study the comovement among stock prices and among exchange rates in a three-good three-country Center-Periphery dynamic equilibrium model in which the Center's agents face portfolio constraints.We characterize equilibrium in closed form for a broad class of portfolio constraints, solving for...

We study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model. Trade in goods gives rise to an additional channel of international propagation - through the terms of trade - absent in traditional single-good models. The...

Recent evidence on the importance of cross-border equity flows calls for a rethinking of the standard theory of external adjustment. We introduce equity holdings and portfolio choice into an otherwise conventional open-economy dynamic equilibrium model. Our model is simple and it admits an exact...

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 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...

Recent evidence on the importance of cross-border equity flows calls for a rethinking of the standard theory of external adjustment. We introduce equity holdings and portfolio choice into an otherwise conventional open-economy dynamic equilibrium model. Our model is simple and admits a...

This paper examines the co-movement among stock market prices and exchange rates within a three-country Center-Periphery dynamic equilibrium model in which agents in the Center country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through...