Policy evaluation and design for continuous time linear rational expectations models: some recent development / Willem H. Buiter.

Format:

Book

Author/Creator:

Buiter, Willem H.

Contributor:

National Bureau of Economic Research.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0034.

NBER technical working paper series no. t0034

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Policy evaluation and design for continuous time linear rational expectations models

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Summary:

The paper surveys some recent developments in policy evaluation and design in continuous time linear rational expectations models. Much recent work in macroeconomics and open economy macroeconomics fits into this category. First the continuous time analogue is reviewed of the discrete time solution method of Blanchard and Kahn. Some problems associated with this solution method are then discussed, including non-uniqueness and zero roots. Optimal (but in general time-inconsistent) and time-consistent (but in general suboptimal) solutions are derived to the general linear-quadratic optimal control problem, based on work by Calvo, Driffill, Miller and Salmon and the author. A numerical example is solved, involving optimal and time-consistent anti-inflationary policy design in a contract model.

Notes:

Print version record

April 1984.