- 18 -
Where x is proportional to the degree of risk aversion, θ, bt, and b*t are the shares
of world wealth in domestic assets and foreign assets respectively and var(st+1) is the
conditional variance of the future exchange rate. Or as in a bond-market led speculative
attack model as:
i=i* +∆set+1 +θ(bt -bt* -st)
Another interesting modification specific to emerging markets is suggested by
Arida, Bacha and Lara-Resende (2004) wherein the risk premium depends on the
interaction between judicial uncertainty (the uncertainty that contracts will be enforced
by courts) and capital controls.
More intriguing information
1. Washington Irving and the Knickerbocker Group2. The name is absent
3. Multifunctionality of Agriculture: An Inquiry Into the Complementarity Between Landscape Preservation and Food Security
4. Effort and Performance in Public-Policy Contests
5. The name is absent
6. Pass-through of external shocks along the pricing chain: A panel estimation approach for the euro area
7. Conflict and Uncertainty: A Dynamic Approach
8. The name is absent
9. The name is absent
10. Long-Term Capital Movements