The dynamic version of the Glosten and Milgrom (1985) model of asset pricing with asymmetric information is studied. It is shown that there is a unique equilibrium when the next-period value function of the informed trader, who knows the terminal value of the asset, is strictly convex and strictly monotone in terms of the market maker’s prior belief. A characterization of the bid and ask prices...

We study how the sequential formation of free trade areas affects trade flows between member countries. In a three–country, three–good model of comparative advantage if two countries have an FTA, and both sign a similar agreement with the third, trade between the two decreases. However, if only one of them signs an additional FTA, a huband-spoke pattern arises, and trade between the initial mem...

In a simple model where global trade negotiations precede sequential Free Trade Agreement (FTA) formation, we show global tari¤ negotiations can prevent global free trade: FTA formation can yield global free trade in the absence of global tari¤ negotiations, but global free trade never emerges when global tari¤ negotitaions precede FTA formation. Intuitively, global tari¤ negotiations can preve...

Comparative advantage and trade costs shape the geography of cross-border supply chains and trade flows. To quantify these forces, we build a model of trade with sequential, multi-stage production that features technology differences both across and within individual production stages. We estimate technology and trade costs in the model via simulated method of moments, matching bilateral shipme...

The important characteristic of international competition between firms from developed and less developed countries is vertical product differentiation, where firms’ quality choices are strategic decisions. We consider a model with sequential quality choice and the possibility of imitation, and compare positive and normative aspects of this setup in free trade and under strategic trade policy. ...

from the perspective of new growth models and new international trade theories, both exports and imports play an important role in a dynamic economy. economically, we cannot merely emphasize on a positive trade balance and we ignore the benefits of imports, and also we cannot advise negative trade balance. but the main concern of policy makers about international trade should be making stabilit...