The foreign debts of the European countries are at the core of the current crises. Generally, the crises are attributed to government budget deficits in excess of the values stated in the Stability and Growth Pact (SGP)/Maastricht treaty. Proposals for reform generally involve increasing the...

This paper applies the NATREX model of equilibrium exchange rates to evaluate several key studies of the Central and Eastern European Countries (CEEC) in general, with particular emphasis upon the Czech Republic and Hungary and with references to Poland and Bulgaria. On the basis of the NATREX...

What is an optimal or a sustainable external debt - for a country, region or sector? How should one monitor and evaluate debt to preclude a crisis? We use stochastic optimal control/dynamic programming to derive an optimal debt. The deviation of the actual from the optimal will serve as a...

We use stochastic optimal control-dynamic programming (DP) to derive the optimal foreign debt/net worth, consumption/net worth, current account/net worth, and endogenous growth rate in an open economy. Unlike the literature that uses an Intertemporal Budget Constraint (IBC) or the Maximum...

The ultimate object of research concerning the Euro is to answer the following questions: (#1) What is the equilibrium trajectory of the nominal euro, measured as dollars/euro? (#2) To what extent has the equilibrium nominal euro been determined by relative prices (PPP), and to what extent has...

A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

The "Pessimists" and the "Optimists" disagree whether the US external deficits and the associated buildup of US net foreign liabilities are problems that require urgent attention. A warning signal should be that the debt ratio deviates significantly from the optimal ratio. The optimal debt ratio...

The recent financial crises, especially the debt crisis in Asia, have led to questions su ch as: what are their causes, what is an excessive debt and how vulnerable is an economy to external shocks? We develop an economic model of international finance and debt based upon two sources of...

In July 1997, the economies of East Asia became embroiled in one of the worst financial crises of the postwar period. Yet, prior to the crisis, these economies were seen as models of economic growth experiencing sustained growth rates that exceeded those earlier thought unattainable. Why did the...

Banks should evaluate whether a borrower is likely to default. I apply several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities sides. The...