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Optimal Policy with Partial Information in a Forward-Looking Model: Certainty-Equivalence Redux / Lars E. O. Svensson, Michael Woodford.
- Format:
- Book
- Author/Creator:
- Svensson, Lars E. O.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w9430.
- NBER working paper series no. w9430
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Optimal Policy with Partial Information in a Forward-Looking Model
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2003.
- Summary:
- This paper proves a certainty equivalence result for optimal policy under commitment with symmetric partial information about the state of the economy in a model with forward-looking variables. This result is used in our previous paper, Indicator Variables for Optimal Policy,' which synthesizes what is known about the case of symmetric partial information, and derives useful general formulas for computation of the optimal policy response coefficients and efficient estimates of the state of the economy in the context of a fairly general forward-looking rational-expectations model. In particular, our proof takes into account that, under commitment, the policymaker can affect the future evolution of the observable variables, and thereby potentially affect the future information available.
- Notes:
- Print version record
- January 2003.
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