The differential game theory of RMB exchange rate under Marshall-Lerner Conditions and Constraints

Abstract

The Marshall-Lerner condition is a theory to study how the exchange rate changes influence the payment balance in international trade. However, in the international trade business, using the Marshall - Lerner condition for decision-making model always leads to conclusions that is contrary to expectations and it lacks of satisfactory technical demonstration effect. Therefore, this deficit tends to make the Marshall - Lerner Condition trapped in the scientific confusion. In this paper, differential game theory is applied to the Marshall - Lerner condition. The Marshall - Lerner condition correction model is derived, then the old Marshall - Lerner conditions are expanded. The new model meets the scope of control of the international trade balance and provides a new technical analysis tools.  This preliminary research created precedent study of the Marshall-Lerner condition dynamics.