Bubbles and crashes in a behavioural finance model.

Finance; Model; Working;

Bubbles and Crashes in a Behavioural Finance Model

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We contrast these "behavioural" bubbles with "rational" bubbles.exchange rate, bounded rationality, heterogeneous agents, bubbles and crashes, complex dynamics

Trade intermediation and the organization of exporters

The business literature and recent descriptive evidence show that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper introduces intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enforceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support. --Trade intermediation,international trade, heterogeneous firms,incomplete contracts

International Antitrust Negotiations and the False Hope of the WTO

Multinational corporations ( MNCs ) operate today in an increasingly open global trade environment. While tariff barriers have collapsed dramatically, several states and numerous scholars have raised concerns that the benefits of trade liberalization are undermined by various non-tariff barriers ( NTBs ) to trade, including the anticompetitive business practices of private enterprise. As a result, demands to link trade and antitrust policies more closely by extending the coverage of the World Trade Organization ( WTO ) to incorporate antitrust law have gathered momentum over the last decade. Most advocates of a WTO antitrust agreement base their normative claims on largely intuitive assumptions about the necessity or desirability of international rules. The existing literature contains few examinations of the strategic situation that characterizes international antitrust cooperation and, as a result, has either completely ignored or largely mischaracterized the collective action problem that has impeded the efforts to negotiate any multinational antitrust rules. With the help of insights developed in game theory, this Article seeks to fill the gap in the current debate by analyzing the strategic interactions underlying states\u27 attempts to seek convergence of their antitrust laws. Understanding why attempts to generate formal international antitrust cooperation have thus far been unsuccessful is a critical prerequisite for designing a normatively desirable international antitrust regime. By offering a more accurate descriptive account for the failure to reach a binding international antitrust agreement, the Article can also be expected to inform the normative debate on optimal international antitrust governance

Trade Intermediation and the Organization of Exporters

The business literature shows that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper models the endogenous emergence of intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enorceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support. JEL classifcation: F12, F23Trade intermediation, international trade, heterogeneous rms, incomplete contracts.

Bubbling and crashing exchange rates.

Exchange; Exchange rates; Working;

Fundamental and non-fundamental equilibria in the foreign exchange market. A behavioural framework.

Equilibrium; Exchange; Foreign exchange; Framework; Market; Working;

Fundamental and Non-Fundamental Equilibria in the Foreign Exchange Market. A Behavioural Finance Framework

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We contrast these ”behavioural” bubbles with ”rational” bubbles.exchange rate, bounded rationality, heterogeneous agents, bubbles and crashes, complex dynamics, basins of attraction