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A Two-Country Discontinuous General Equilibrium Model

15 Pages Posted: 27 Oct 2008  

Ciprian Necula

University of Zurich - Department of Banking and Finance; Bucharest University of Economic Studies, Department of Money and Banking

Date Written: July 5, 2008

Abstract

The aim of this paper is to develop a continuous time general equilibrium model for a two country Lucas type economy. The model assumes that the output in the two countries follows a jump-diffusion stochastic process. We obtain the results concerning the evaluation of financial assets, the determination of the exchange rate, of the interest rate, and of the risk premium in this two-country economy.

Keywords: general equilibrium model, two-country Lucas economy, exchange rate, risk premium, jump-diffusion

JEL Classification: C02, C61, D50, G12

Suggested Citation

Necula, Ciprian, A Two-Country Discontinuous General Equilibrium Model (July 5, 2008). Available at SSRN: https://ssrn.com/abstract=1289413 or http://dx.doi.org/10.2139/ssrn.1289413

Ciprian Necula (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland

Bucharest University of Economic Studies, Department of Money and Banking ( email )

6, Romana Square, District 1
Bucharest, 010374
Romania

HOME PAGE: http://www.dofin.ase.ro/cipnec

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