International Price Linkage within a Region: The Case of East Asia

This paper investigates how “prices” in East Asian economies correlate with those in Japan and the United States. The analysis is particularly noteworthy because although the East Asian economies are geographically close to Japan, their currencies have been tied more closely to the U.S. dollar. In this paper, we analyze two different types of “prices”: overall price levels in terms of the same currency and relative prices among different commodities. We demonstrate that overall price levels in the East Asian economies are more closely related to those in the United States. However, the relative prices in East Asia, especially those in Taiwan and Korea, are more closely correlated with those in Japan. These price correlation patterns are in marked contrast with those in other regions.J. Japan. Int. Econ.December 1993,11(4), pp. 643–666. Faculty of Economics, The University of Tokyo, Tokyo, Japan; and Department of Economics, The University of British Columbia, Vancouver, Canada, and Graduate School of Economics, Hitotsubashi University, Japan.     

Correlated quantal responses and equilibrium selection

This paper considers incomplete information games with payoffs subject to correlated random disturbances. It explains the connection between the uniqueness of quantal response equilibria, where large noise is required, and the uniqueness of equilibria in global games, where small noise is required.     

An optimal execution problem with market impact

We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that right-continuity at the time origin is associated with the strength of market impact for large sales; otherwise the value function is continuous. Moreover, we show the semigroup property (Bellman principle) and characterise the value function as a viscosity solution of the corresponding Hamilton–Jacobi–Bellman equation. We present some examples where the form of the optimal strategy changes completely, depending on the amount of the trader’s security holdings, and where optimal strategies in the Black–Scholes type market with nonlinear market impact are not block liquidation but gradual liquidation, even when the trader is risk-neutral.