시장 불완전성과 화폐의 교환성
This paper examines the welfare property of opening trade in country-specific currencies with incomplete markets and a flexible exchange rate system. In the context of a two-country overlapping generations model, we analyze the properties of steady-state equilibria when the source of uncertainty is either purely monetary or purely real. With monetary shocks, asset trade does not fully pool exchange rate risk which is not even present in portfollo autarky. As a result asset trade must make the young generation of at least one country worst off. With real shocks, the result is diffeent. Asset trade can make all members of the young generation better off. This paper also examines the issue of the exchange rate indeterminacy originally raised by Kareken and Wallace (1981). With monetary shocks, currencies become imperfect substitutes and the exchange rate is determinate. However, with purely real shocks, currencies become perfect substitutes and the exchange rate indeterminacy results as in Kareken and Wallace (1981).
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