Imperfect Market Models

In this chapter we turn to the development, analysis, and computation of international financial models, both static and dynamic, in the case of market imperfections. This chapter constructs models that are extensions, respectively, of the static single country imperfect market models studied in Chapter 9 and their dynamic counterparts that were developed in Chapter 10. Moreover, here we no longer assume that the feasible set underlying each sector of each country contains only the budget constraints. Consequently, the models in this chapter can also be viewed as extensions of the financial models in preceding chapters that assumed more specialized feasible sets. We conclude this chapter with a discussion of how the models can be even further extended to a noncooperative game scenario.