This appendix provides a detailed derivation of the risk premium, following the framework set by Bernanke, Gertler, and Gilchrist (BGG). The analysis focuses on the contracting problem between entrepreneurs and foreign lenders, where the entrepreneurs' net worth, dollar interest rate, and prices are known at the time of contracting. The key assumption is that the rental rate on capital in dollars is known, though this assumption is discussed briefly. The optimal contract is a standard debt contract with a fixed repayment amount, and monitoring occurs only if the realized shock is low enough, leading to bankruptcy. The expected return to the entrepreneur and the opportunity cost of the loan are derived, and the optimal investment-to-net worth ratio and the cutoff for monitoring costs are determined. The risk premium is shown to be an increasing function of the value of aggregate investment relative to aggregate net worth. The appendix also discusses the steady state and linear approximation of the equilibrium system, proving the existence and uniqueness of a non-stochastic steady state. The steady state values of key variables are derived, and the linearized equations around this steady state are provided. The saddle-path dynamics are analyzed, and the conditions for their existence are outlined. Finally, the optimality of flexible interest rates is demonstrated, showing that the log of the investment level can be expressed as a function of the log of labor, with terms independent of monetary or exchange rate policy.This appendix provides a detailed derivation of the risk premium, following the framework set by Bernanke, Gertler, and Gilchrist (BGG). The analysis focuses on the contracting problem between entrepreneurs and foreign lenders, where the entrepreneurs' net worth, dollar interest rate, and prices are known at the time of contracting. The key assumption is that the rental rate on capital in dollars is known, though this assumption is discussed briefly. The optimal contract is a standard debt contract with a fixed repayment amount, and monitoring occurs only if the realized shock is low enough, leading to bankruptcy. The expected return to the entrepreneur and the opportunity cost of the loan are derived, and the optimal investment-to-net worth ratio and the cutoff for monitoring costs are determined. The risk premium is shown to be an increasing function of the value of aggregate investment relative to aggregate net worth. The appendix also discusses the steady state and linear approximation of the equilibrium system, proving the existence and uniqueness of a non-stochastic steady state. The steady state values of key variables are derived, and the linearized equations around this steady state are provided. The saddle-path dynamics are analyzed, and the conditions for their existence are outlined. Finally, the optimality of flexible interest rates is demonstrated, showing that the log of the investment level can be expressed as a function of the log of labor, with terms independent of monetary or exchange rate policy.