Author : Mehmet Cangul
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.4/5 (2 download)
Book Synopsis Constructing a Positive Shock: Growth Through the Lens of Option Pricing by : Mehmet Cangul
Download or read book Constructing a Positive Shock: Growth Through the Lens of Option Pricing written by Mehmet Cangul and published by International Monetary Fund. This book was released on 2023-07-28 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Low-income economies face negative shocks whose frequency and disproportionate impact overcome growth trajectories, producing a negative drift. COVID-19 was the latest such episode. To escape this negative drift, and build a durable recovery, there is a need for a counter-balancing force: to construct a positive shock. Growth is realized through decisions that fall under two categories, routine and non-linear. While routine decisions modify existing economic behavior along the same path, non-linear decisions describe riskier options that involve transformation. Option pricing theory can be useful to describe the latter, and construct the positive shock required to escape the negative drift.