Attaining stochastic optimal control over debt ratios in US markets

Liu, Wei-han

2023-06-01

10.1007/s11156-023-01173-0

REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING   影响因子和分区

0924-865X

1573-7179

We propose a refined dynamic programming model based on a hidden Markov chain formulation and a nonlinear filtering technique to calculate the optimal debt ratio for public and private sectors for different scenarios. We then conduct the empirical analysis of the U.S. markets in real estate and equities during 1991.Q1 and 2020.Q1, comparing them with the theoretical results. It indicates that U.S. households and governments spent more than they can afford. While households reduced their debt ratio during times of economic distress, the public sector hiked its debt ratio to stimulate the economy. The policy effect took a long time to accumulate, and the outcome was lower than expected to revitalize the economy in time.

Stochastic optimal control Optimal debt ratio Regime-switching Markov process

ESCI

英语

第一 ; 通讯

Business & Economics

Business, Finance

WOS:001003203700001

SPRINGER

Web of Science

Southern Univ Sci & Technol, Dept Finance, 1088 Xueyuan Rd, Shenzhen, Guangdong, Peoples R China

Liu, Wei-han. Attaining stochastic optimal control over debt ratios in US markets[J]. REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING,2023,61(3).

Liu, Wei-han.(2023).Attaining stochastic optimal control over debt ratios in US markets.REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING,61(3).

Liu, Wei-han."Attaining stochastic optimal control over debt ratios in US markets".REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING 61.3(2023).