Exercise 11.7

BOP Crisis With Interest-Bearing Reserves

Problem

Consider the model of BOP crises of Section 11.5, but now assume that foreign reserves held by the central bank, \(k_t\), earn interest at the rate \(r\). Provide an implicit expression for the post collapse rate of devaluation, \(\epsilon^H\), and derive an expression for the time of the crisis, \(T\).

Answer

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---
title: "Exercise 11.7"
subtitle: "BOP Crisis With Interest-Bearing Reserves"
---
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## Problem

Consider the model of BOP crises of Section 11.5, but now assume that foreign reserves held by the central bank, $k_t$, earn interest at the rate $r$. Provide an implicit expression for the post collapse rate of devaluation, $\epsilon^H$, and derive an expression for the time of the crisis, $T$. 

## Answer

_No solution has been posted yet. If you have a solution, we invite you to share it in the comment box at the bottom of this page._