ISSN:
1572-9982
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Summary Commonly, macro trade models which analyze the effects of governmental policies assumed that the rate of the international flow of capital is dependent upon international interest rates. This paper demonstrates that such a specification is inconsistent with the assumption of arbitrage in securities internationally. This is demonstrated first within a conventional static macro trade model, second within a class of dynamic models where short-run capital flows, but not total capital flows, depend upon interest rate levels, and, finally, within a general portfolio macro trade framework. We recommend the assumption of international arbitrage behavior.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF01239240
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