Bounded & Unbounded Stochastic Processes

  • Colin Rose

Abstract

In recent years, economic modelling has seen a significant shift from deterministic models to stochastic ones. Because of the prevalence of imperfect information and rational expectations, bounded and unbounded stochastic models now play an important role in both micro- and macro-economics, as well as the full ambit of financial models. This chapter illustrates how Mathematica can be used to model and simulate a variety of stochastic problems. Particular attention is focused upon exchange rate target zones and the theory of irreversible investment under uncertainty.

Keywords

Exchange Rate Random Walk Normal Random Variable Target Zone Fair Coin 
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References

  1. Dixit, Avinash (1992), “Investment and Hysteresis”, Journal of Economic Perspectives, Volume 6, No.1, Winter 1992,107–132.CrossRefGoogle Scholar
  2. Krugman, Paul (1991), “Target Zones and Exchange Rate Dynamics”, The Quarterly Journal of Economics, August 1991, 669–682.Google Scholar
  3. Pindyck, Robert (1991), “Irreversibility, Uncertainty, and Investment”, journal of Economic Literature, September 1991, 1110–1148.Google Scholar
  4. Svensson, Lars (1993), “Recent Research on Exchange Rate Target Zones: an interpretation”, Journal of Economic Perspectives, forthcoming.Google Scholar

Copyright information

© Springer Science+Business Media New York 1993

Authors and Affiliations

  • Colin Rose

There are no affiliations available

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