Finitely additive exchange economies

It is shown that the core and the set of Walras allocations of a non-atomic exchange economy are equal, if the set A of agents is either countable or a continuum, and even if all subsets of A are admitted as coalitions. The set of Walras allocations is shown to be not empty. These results are obtained by use of finitely additive measures defined on the algebra of all subsets of A.     

The dynamic relationship between stock,bond and foreign exchange markets

This paper investigates whether the deviation of a currency from its fundamentally determined rate of return affects the relationship between interest rates and stock market yields. A time-varying transition probability, the Markov-switching vector autoregressive (MS-VAR) model, is utilized for this purpose. Wald and likelihood ratio tests are computed and used as model adequacy measures. In order to analyze the link between the variables, impulse–response functions are employed. A sticky price exchange rate model is used to show the fundamentally determined rate of return of currencies. States are defined as either overvalued or undervalued, depending on the position of the observed exchange rate compared to its fundamentally determined rate. The model is applied to four major currencies: the Australian Dollar, the Canadian Dollar, the Japanese Yen, and the British Pound. Transition between the states is linked to the risk-adjusted excess return (the Sharpe ratio) of the debt and equity markets of the respective currencies in order to understand whether over- and undervaluation is connected to the returns in these markets. The results provide evidence that the relationship between economic fundamentals and nominal exchange rates are subject to change depending on the over- or undervaluation of the currencies relative to their fundamentally determined rate of return. An extension of this result shows that the Sharpe ratios of debt and equity investments in the currencies influence the evolution of the transitional dynamics of the exchange rates’ deviation from their fundamental values.     

Consistent collusion-proofness and correlation in exchange economies

We present a feasible strategic market mechanism with finitely many agents whose Nash, semi-strong Nash and coalition-proof Nash equilibria fully implement the Walrasian equilibria. We define a strategic equilibrium concept, called correlated semi-strong equilibrium, and show that the Walrasian equilibria can be implemented by these equilibria, and also by the coalition-proof correlated equilibria of our mechanism. We show that these two concepts, suitably modified with transfers, fully implement the Pareto optimal allocations.     

Regularity in overlapping generations exchange economies

In this paper we develop a regularity theory for stationary overlapping generations economies. We show that generically there is an odd number of steady states in which a non-zero amount of nominal debt (fiat money) is passed from generation to generation and an odd number in which there is no nominal debt. We are also interested in non-steady state perfect foresight paths. As a first step in this direction we analyze the behavior of paths near a steady state. We show that generically they are given by a second order difference equation that satisfies strong regularity properties. Economic theory alone imposes little restriction on those paths: With n goods and consumers who live for m periods, for example, the only restriction on the set of paths converging to the steady state is that they form a manifold of dimension no less than one, no more than 2nm.     

The hybrid equilibria and core selection in exchange economies with externalities

This paper introduces a hybrid equilibrium concept that combines the elements of cooperative and non-cooperative behaviors in an exchange economy with externalities. For a fixed coalition structure (or a partition of traders), the hybrid equilibrium is a price and consumption bundle such that each coalition chooses a core solution from its budget set and the consumption bundles are feasible. It becomes the competitive equilibrium when the position is the finest, and it selects a core allocation when the partition is the coarsest. The paper provides sufficient conditions for the existence of a hybrid equilibrium for any coalition structure.     

Walrasian social orderings in exchange economies

We study social ordering functions in exchange economies. We show that if a social ordering function satisfies certain Pareto, individual rationality, and local independence conditions, then (i) the set of top allocations of the chosen social ordering is contained in the set of Walrasian allocations and is typically non-empty, and (ii) all individually rational but non-Walrasian allocations are typically ranked indifferently. Thus, such a social ordering function is quite similar to the Walrasian correspondence, which can be regarded as the social ordering function whose associated indifference classes are the set of Walrasian allocations and the set of other allocations.     

The symmetrical and positive relationship between crude oil and nominal exchange rate returns

This paper investigates both the static and dynamic relationships between daily crude oil returns and US dollar exchange rate returns using a test for symmetrical exceedance correlations and two mixture copulas. Empirical results demonstrate that the exceedance correlations between oil and exchange rate returns are both positive and symmetrical, indicating that the two return rates move in the same direction and that the relationship between them is symmetrical for the upper and lower quantiles. The crude oil-exchange rate relationship is sensitive to the sample period investigated. Before the 1998 financial crisis, exceedance correlations are close to zero, showing almost no correlation between the oil and exchange rate markets. However, the positive co-movement has significantly increased since the 2008 financial crisis. Furthermore, Kendall's tau coefficients of two symmetrized copulas greatly increase after the 2008 financial crisis, revealing that the probability of both returns moving in the same direction is higher than it is in the opposite direction.     

Accessibility of optima in pure exchange economies

Assuming differentiable monotonicity and differentiable convexity of utility functions, we show that if y and z are allocations of a pure exchange economy with z optimal and preferred to y by every agent, then there is a trade curve of finite length from y to z. We make no assumption on utility functions designed to ‘keep away from the boundary’. The conclusion need not hold if z is not optimal, unless a special boundary condition is assumed and (l, m) ≠ (2, 2).     

The relationship between R&D,innovation and productivity in emerging economies: CDM model and alternatives

CDM (Crépon, Duguet and Mairesse, 1988) is a workhorse model in the economics of innovation, which explains productivity in a three-stage procedure driven initially by R&D and leads to patents and then to productivity improvements. Based on the logic of this model, an increasing number of papers applies it to emerging economies but modifies the original model without being explicit about the nature and implications of this modification. We argue in this paper that, in its original form, CDM does not capture stylized facts of the determinants of productivity in emerging economies and that we need alternative models. Accordingly, we are critical of papers that try to maintain the validity of the model but actually change it. For that purpose, we test the original CDM model and its two alternatives: investment and production capability–driven models. Our research is based on a large sample of firms in Central and Eastern Europe, former Soviet republics and Turkey, and we show that the alternative models are much closer to the stylized facts of innovation activities and technology upgrading in these and other emerging economies. Our conclusions have important policy implications, which we discuss.     

Arbitrage and equilibrium in unbounded exchange economies with satiation

In his seminal paper on arbitrage and competitive equilibrium in unbounded exchange economies, Werner (1987) proved the existence of a competitive equilibrium, under a price no-arbitrage condition, without assuming either local or global nonsatiation. Werner’s existence result contrasts sharply with classical existence results for bounded exchange economies which require, at minimum, global nonsatiation at rational allocations. Why do unbounded exchange economies admit existence without local or global nonsatiation? This question is the focus of our paper. First, we show that in unbounded exchange economies, even if some agents’ preferences are satiated, the absence of arbitrage is sufficient for the existence of competitive equilibria, as long as each agent who is satiated has a nonempty set of useful net trades– that is, as long as agents’ preferences satisfy weak nonsatiation. Second, we provide a new approach to proving existence in unbounded exchange economies. The key step in our new approach is to transform the original economy to an economy satisfying global nonsatiation such that all equilibria of the transformed economy are equilibria of the original economy. What our approach makes clear is that it is precisely the condition of weak nonsatiation – a condition considerably weaker than local or global nonsatiation – that makes possible this transformation.     

Quality of local equilibria in discrete exchange economies

This paper defines the notion of a local equilibrium of quality $(r,s)$, $0\le r,s$, in a discrete exchange economy: a partial allocation and item prices that guarantee certain stability properties parametrized by the numbers $r$ and $s$. The quality $(r,s)$ measures the fit between the allocation and the prices: the larger $r$ and $s$ the closer the fit. For $r,s\le 1$ this notion provides a graceful degradation for the conditional equilibria of Fu, Kleinberg and Lavi (2012) which are exactly the local equilibria of quality $(1,1)$. For $1<r,s$ the local equilibria of quality $(r,s)$ are more stable than conditional equilibria. Any local equilibrium of quality $(r,s)$ provides, without any assumption on the type of the agents’ valuations, an allocation whose value is at least $\frac{rs}{1+rs}$ the optimal fractional allocation. In any economy in which all agents’ valuations are $a$-submodular, i.e., exhibit complementarity bounded by $a\ge 1$, there is a local equilibrium of quality $(\frac{1}{a},\frac{1}{a})$. In such an economy any greedy allocation provides a local equilibrium of quality $(1,\frac{1}{a})$. Walrasian equilibria are not amenable to such graceful degradation.     

Edgeworth rejective core and dividends equilibria of satiated exchange economies

For an exchange economy, under assumptions which did not bring about the existence of equilibrium with dividends as yet, we prove the non-emptiness of the Edgeworth rejective core. Then, via  and ’s decentralization result, we solve the equilibrium with dividends existence problem. Adding to the same assumptions a weak non-satiation condition which differs from the weak non-satiation assumption introduced by Allouch and Le Van (2009), we show in the last section the existence of a Walrasian quasiequilibrium. This result, which fits with exchange economies whose consumers’ utility functions are not assumed to be upper semicontinuous, complements the one obtained by Martins-da-Rocha and Monteiro (2009).     

De facto and official exchange rate regimes in transition economies

This paper provides an empirical investigation on the discrepancies between official and de facto exchange rate regimes in transition economies. We use a probit model to describe the determination of regime discrepancies. We find that “errors” in the selection of official regimes as well as the macroeconomic developments calling for conflicting adjustments in exchange rate regimes are important determinants of regime discrepancies.     

Pitfalls in estimating equilibrium exchange rates for transition economies

The literature on equilibrium exchange rates for the central and eastern European countries has mushroomed in recent years. In this paper, we discuss the econometric pitfalls involved in such estimations and endow the reader with the methodological ingredients to avoid such biases. We review the commonly used approaches and identify problems related to the most straightforward econometric procedures as they often do not take the transition process properly into account. As an alternative, we propose a two-stage “out-of-sample” strategy that consists of estimating the relationship between the exchange rates and fundamentals and the extrapolation of these relationships to transition economies.     

Generic properties of the core and equilibria of pure exchange economies

We show that for an open dense set of markets with a continuum of traders the number of equilibrium allocations [which by the celebrated theorem of ^{Aumann (Econometrica. 1964, 32. 39–50)} coincide with the core allocations for such markets are finite. This presents a limiting case result that complements similar asymptotic theorems for cores of large economies proved by ^{Bewley (Econometrica 1973, 41, 425–454)}, and ^{Dierker (Journal of Mathematical Economics 1975, 2. 155–169)}. If we require that the measure on the space of agents be one with a finite number of atoms of equal weight, our reasoning recovers the classical results obtained by ^{Debreu (Econometrica. 1970. 38, 387–392)} for economies with a finite number of agents.     

Dynamic relationship between stock prices and exchange rates for G-7 countries

There are two major findings from our time-series estimations. First, we find that there is no long-run significant relationship between stock prices and exchange rates in the G-7 countries. This result interfaces with Bahmani-Oskooee and Sohrabian’s (1992) finding, but contrasts with the studies that suggest there be a significant relationship between these two financial variables. Our second finding is that the short-run significant relationship has only been found for one day in certain G-7 countries. For instance, currency depreciation often drags down stock returns in the German financial market, but it stimulates the Canadian and UK markets on the following day. However, an increase in stock price often causes currency depreciation the next day in Italy and Japan. In addition, we also find that the record of stock price and the value of the dollar cannot be depended on when predicting the future in the US, either in the short-run or long-run.     

The relationship between oil prices,the stock market and the exchange rate: Evidence from Mexico

This paper analyzes the variables of oil price, exchange rate and stock market index to explain how they interact with each other in the Mexican economy. The examined period includes monthly data from January 1992 to June 2017. A Vector Autoregressive Model (VAR) is implemented that includes oil prices, the nominal exchange rate, the Mexican stock market index, and the consumer price index. Results indicate that the exchange rate has a negative and statistically significant effect on the stock market index; this indicates that an appreciation of the exchange rate is related to an increase in the stock market index. It is also found that the consumer price index has a positive effect on the exchange rate and a negative effect on the stock market index. The results also indicate that oil prices are statistically significant against the exchange rate, concluding that an increase in oil prices creates an appreciation of the exchange rate. In addition, the impulse-response functions show that the effects found tend to disappear over time.     

The relationship between leader–member exchange and employee outcomes: review of past themes and future potential

Management Review Quarterly - Research on leader–member exchange (LMX) has gained momentum with a large number of studies investigating its impact on multiple levels. This article...     

Capital inflows,exchange market pressure,and credit growth in four transition economies with fixed exchange rates

With the transition from planned economic systems to membership in the European Union, capital inflows and domestic credit have expanded tremendously in Central and Eastern Europe. Four of these countries—Estonia, Latvia, Lithuania, and Bulgaria—maintain fixed exchange-rate regimes, which may face pressure because of rapid credit growth or during a slowdown. This study uses a Vector Autoregressive (VAR) approach to assess the contribution of capital inflows to exchange market pressure in these four countries, as well as to the growth of domestic credit. Both FDI and non-FDI flows are shown to feed credit growth in Bulgaria, but not the Baltics. Relatively volatile flows, particularly non-FDI inflows, reduce EMP in three of the four countries.