A novel approach to exchange rate control using controlled backward stochastic differential equations

A. N. Yannacopoulos
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A. N. Yannacopoulos: Department of Statistics and Actuarial Science, University of the Aegean, GR 83200 Karlovassi, Samos, Greece

Ekonomia, 2005, vol. 8, issue 1, 74-91

Abstract: We present an approach to exchange rate control based on the reformulation of the exchange rate equation as a controlled backward stochastic differential equation. We obtain an explicit solution for the optimal managed flot monetary rule, which is shown to depend crucially on the expectations of future values of the fundamentals, discounted properly.

JEL-codes: C65 D84 F31 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ekn:ekonom:v:8:y:2005:i:1:p:74-91

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