Optimal adjustment to trade shocks under alternative development strategies

Optimal Convergence Trade Strategies∗

Convergence trades exploit temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively overpriced assets. This paper studies optimal convergence trades under both recurring and non-recurring arbitrage opportunities represented by continuing and ‘stopped’ cointegrated price processes and considers both fixed and stochastic (Poisson) horizons. We demon...

Indirect Adjustment-costs under Alternative Coordination Regimes

Villas-Boas, and seminar participants at MIT. Of course, the usual disclaimer applies. Abstract The paper is a study of barriers to coordination in terms of agents' incentives to search for and communicate complementary information. In particular, I look at the value of commitment by comparing game forms in which a contract is negotiated prior to, versus after, search and communication. The com...

Are Shocks to the Terms of Trade Shocks to Productivity?

__________________________________________________________________ International trade is frequently thought of as a production technology in which the inputs are exports and the outputs are imports. Exports are transformed into imports at the rate of the price of exports relative to the price of imports: the reciprocal of the terms of trade. Cast this way, a change in the terms of trade acts a...

Alternative Use Values within a Watershed under Transitory Supply Shocks

Optimal Strategic Trade Policy under Asymmetric Information

When cost is private information in the Brander{Spencer model, the home government is confronted by a decision of choosing between two policy options: a menu of policies and a uniform policy. The former induces separation and so reveals the cost information to the foreign competitors. The latter helps the weak ̄rm by concealing the cost information. The main result from this study is that polic...