The hybrid equilibria and core selection in exchange economies with externalities

Article Abstract:

The combined elements of cooperative and non-cooperative behaviors in an exchange economy with externalities are presented in a hybrid equilibrium concept. The necessary conditions for a hybrid equilibrium to exist, which are also provided, are satisfied in exchange economies with non-negative externalities and in the Arrow-Debreu exchange economy. The new concepts reflect the three features of modern international trade, which are trading with outsiders given the price, pooling of resources like mutual funds in a community, and coexistence of cooperation within a bloc and competition across blocs.

International trade

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Optimal stochastic intervention control with application to the exchange rate

Article Abstract:

A mathematical model, composed of a stochastic control and impulse control problem, was created to address the question of optimally manipulating the exchange rate. The model, based on quasivariational Hamilton-Jacobi-Bellman inequalities, assumes that the government can control the interest rate and influence foreign exchange markets through the trading of foreign currency. Results show that absolute solutions cannot be arrived at easily, necessitating future research on the subject of numeric methods.

Models, Prices and rates, Stochastic analysis, Foreign exchange, Foreign exchange rates

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Financial innovation, precautionary saving and the risk-free rate

Article Abstract:

The theory of precautionary saving implies the effects of financial innovation on the risk-free interest rate. It indicates that the presence of uninsured risk in the economy can lead to higher savings and lower equilibrium interest rates in case of convex marginal utility. It will also induce better insurance, reduction in consumption volatility, and price decrease. This indicates that financial innovations should tend to cause an increase in the interest rates.

Interest rates

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