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Stochastic Optimal Control, International Finance, and Debt Crises$
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Jerome L. Stein

Print publication date: 2006

Print ISBN-13: 9780199280575

Published to Oxford Scholarship Online: May 2006

DOI: 10.1093/0199280576.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 22 October 2019

Optimal debt and equilibrium exchange rates in a stochastic environment: an overview

Optimal debt and equilibrium exchange rates in a stochastic environment: an overview

Chapter:
(p.3) 1 Optimal debt and equilibrium exchange rates in a stochastic environment: an overview
Source:
Stochastic Optimal Control, International Finance, and Debt Crises
Author(s):

Jerome L. Stein (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0199280576.003.0001

This overview chapter explains the relevance and the contributions of this book to economic theory and policy. The economic theory and mathematics developed in chapters 2 and 3 derive benchmarks for the optimal debt in an environment where both the return on capital and the real rate of interest are stochastic variables. The equilibrium real exchange rate, the subject of chapter 4, is where the real exchange rate is heading. These benchmarks are applied in chapters 5-9 to the euro, the real exchange rate of the transition economies in Eastern Europe, default risks in emerging market countries, the Asian crises, and the United States current account deficits.

Keywords:   optimal debt, real exchange rate, transition economies, current account deficits, return on capital, currency crises, debt crises

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