RDP 8610: Equilibrium Exchange Rates and a Popular Model of International Asset Demands: An Inconsistency
Equation
E
t
(
dw
)
=
w
[
μ
1
+
Σ
j
a
j
(
μ
j
−
μ
1
)
]
−
c
var
t
(
dw
)
=
w
2
[
σ
1
2
+
2
Σ
j
a
j
(
σ
j
1
−
σ
1
2
)
+
Σ
j
Σ
i
a
j
a
i
(
σ
ji
−
σ
j
1
−
σ
1
i
+
σ
1
2
)
]
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