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ABSTRACTThis paper endogenizes the debt‐equity ratio and embodies financial leverage in a cash‐in‐advance model of endogenous growth. Our analysis finds that the debt‐equity ratio is positively related to the balanced‐growth rate, since it serves as a 'financial accelerator' to stimulate investment projects. Compared to previous studies, this positive relationship gives rise to an additional balance‐sheet effect, which substantially affects the macroeconomic consequences of monetary and taxation policies. Due to the existence of the balance‐sheet effect, we also find that the Friedman rule is not necessarily optimal.

The aim of this text was to evaluate Mongolian foreign policy by applying the hedging strategy. We have arrived at the conclusion that the way Mongolia strives to secure itself against insecurities and risks in the fast-changing environment of East Asia corresponds to main principles of the hedging strategy and in basic outlines that it is not different from procedures applied by countries in Southeast Asia. After 1990, Mongolians enrolled in the Non-Aligned Movement; they voluntarily enlisted their country in the nuclear-free zone and started to apply to a friendly relation policy towards powers in their neighbourhood. These are basically same methods copied by all ASEAN member states. In its foreign policy, Mongolia applies a full range of hedging options: both acceptance and rejection of China's power. In the context of East and Southeast Asian smaller state strategies, we consider Mongolian efforts as a light form of hedging.