A strand of exchange rate models postulate exchange rate fluctuations are driven by saddle-path dynamics and the related overshooting behavior. Using a bivariate system, the paper illustrates the relationship of the cointegration, saddle-path, and stationarity dynamics. Monte Carlo results...

This paper analyzes the different dynamic features displayed by alternative RE equilibria in the context of the present value for stock prices with feedback. In particular, it is shown that there exists a unique (bubble-free) RE equilibrium implying cointegration between stock prices and...