Willen, Paul (contributor) - 2004 - This version: December 2004
country goes from autarky to international trade, its appetite
for risk stays the same despite the fact that both the level … deficit goes up. We can use a common statistic from regression analysis to help
with our analysis here. For a household income … implies that
pa > p > pb.
Thus, country a goes short the risky asset and country b goes long. By Proposition
3, both countries …