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Model

Chapter

Zusammenfassung

There are two actors: the central bank and speculators. The central bank maximizes utility where instantaneous utility u is derived from the state of the fundamentals θ (t) and is discounted by factor ρ. The initial values of the fundamentals and the attack are θS = θ (0) and AS = A(0). The overall utility U is the sum of the aggregated discounted instantaneous utility up to terminal time T plus the discounted terminal value.1 The terminal time denotes the time when the central bank is forced to devalue and is endogenously determined by the state processes. The terminal value υ is a function of the fundamentals at terminal time less an amount c representing the costs of the regime change. For the remainder of the paper, we assume that the proceeding regime is in a steady state, so that the terminal value υ is constant.

Keywords

Interest Rate Central Bank Time Preference Extend Linear Bellman Equation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Fachmedien Wiesbaden 2016

Authors and Affiliations

  1. 1.Gutmark, Radtke & Company AGFrankfurt am MainGermany

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