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Stochastic Control for Optimal Government Debt Management
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- Author / Creator
- Huaman Aguilar, Ricardo
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We develop stochastic control models for optimal government policies. We study three problems: (1) the optimal debt ceiling, (2) the optimal currency portfolio, and (3) the optimal management of the stabilization funds. The results of this research provide insights that are useful to policy-makers.
For the first problem we present theoretical models for a government that wants to control its debt by imposing a ceiling on its debt-to-GDP ratio. We find explicit solutions for the optimal debt ceiling and we derive a practical recommendation for debt policy based on it.
In the second problem we study the optimal currency portfolio and debt payments in a model that considers debt aversion and jumps in the exchange rates. We find that higher debt aversion and jumps in the exchange rates lead to a lower proportion of optimal debt in foreign currencies. In addition, we show that for a government with extreme debt aversion it is optimal not to issue debt in foreign currencies.
In the last problem we consider a government that wants to control the stabilization fund by depositing money in and withdrawing money from the fund. We obtain explicit solutions for
the optimal bands. Furthermore, we derive a practical recommendation for the management of the stabilization fund based on the optimal bands. -
- Subjects / Keywords
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- Graduation date
- Fall 2015
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- Type of Item
- Thesis
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- Degree
- Doctor of Philosophy
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- License
- This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.