Partial vs General Equilibrium Models of the International Capital Market

Details

Serval ID
serval:BIB_90FC392FB061
Type
A part of a book
Collection
Publications
Title
Partial vs General Equilibrium Models of the International Capital Market
Title of the book
Handbook of International Macroeconomics
Author(s)
Dumas  B.
Publisher
Basil Blackwell publishers
Publication state
Published
Issued date
1994
Editor
Van Der Ploeg  R.
Abstract
In this essay, I discuss and compare two ways of modeling international capital market equilibrium: the orthodox, general-equilibrium approach and the heterodox, partial-equilibrium CAPM (Capital Asset Pricing Model) approach. The benchmark for this comparison is the model's ability to provide an explanation for, or take into account, a number of stylized facts of international finance: UIRP deviations, home-equity preference, PPP deviations and their persistence, consumption behavior in relation to wealth. In addition, I ask which approach is more likely in future research to help us identify the relevant state variables of the economy. None of the models satisfactorily explains the stylized facts but the CAPM approach affords the most productive avenue for empirical research in the immediate future.
Create date
19/11/2007 10:39
Last modification date
20/08/2019 14:54
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