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Author: Willem H. Buiter
Publisher:
ISBN:
Category : Rational expectations (Economic theory)
Languages : en
Pages : 30
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Book Description
Author: Willem H. Buiter
Publisher:
ISBN:
Category : Rational expectations (Economic theory)
Languages : en
Pages : 30
Get Book Here
Book Description
Author: Willem H. Buiter
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this note the method of Hamiltonian dynamics is used to characterize the time-consistent solution to the optimal control problem in a deterministic continuous time rational expectations model. A linear quadratic example based on the work of Miller and Salmon is used for simplicity. To derive the time-consistent rational expectations (or subgame-perfect) solution we first characterize the optimal solution made familiar e.g. through the work of Calvo. The time-consistent solution is then obtained by modifying the optimal solution through the requirement that the co-state variables (shadow prices) of the non-predetermined variables be zero at each instant. Existing solution methods and computational algorithms can be used to obtain the behaviour of the system under optimal policy and under time-consistent policy.
Author: Willem H. Buiter
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 66
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Book Description
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.
Author: John Driffill
Publisher:
ISBN:
Category : Economic forecasting
Languages : en
Pages : 52
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Book Description
Author: Willem H. Buiter
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
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.
Author: Willem H. Buiter
Publisher: University of Michigan Press
ISBN: 9780472101382
Category : Economic development
Languages : en
Pages : 392
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Book Description
Brings together Buiter's major papers on macroeconomic theory and policy
Author: P. Fisher
Publisher: Springer Science & Business Media
ISBN: 9401580022
Category : Business & Economics
Languages : en
Pages : 215
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Book Description
It is commonly believed that macroeconomic models are not useful for policy analysis because they do not take proper account of agents' expectations. Over the last decade, mainstream macroeconomic models in the UK and elsewhere have taken on board the `Rational Expectations Revolution' by explicitly incorporating expectations of the future. In principle, one can perform the same technical exercises on a forward expectations model as on a conventional model -- and more! Rational Expectations in Macroeconomic Models deals with the numerical methods necessary to carry out policy analysis and forecasting with these models. These methods are often passed on by word of mouth or confined to obscure journals. Rational Expectations in Macroeconomic Models brings them together with applications which are interesting in their own right. There is no comparable textbook in the literature. The specific subjects include: (i) solving for model consistent expectations; (ii) the choice of terminal condition and time horizon; (iii) experimental design: i.e., the effect of temporary vs permanent, anticipated vs. unanticipated shocks; deterministic vs. stochastic, dynamic vs. static simulation; (iv) the role of exchange rate; (v) optimal control and inflation-output tradeoffs. The models used are those of the Liverpool Research Group in Macroeconomics, the London Business School and the National Institute of Economic and Social Research.
Author: Frederic S. Mishkin
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 40
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Book Description
Author: George W. Evans
Publisher: Princeton University Press
ISBN: 1400824265
Category : Business & Economics
Languages : en
Pages : 440
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Book Description
A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by expectations. Here George Evans and Seppo Honkapohja bring new explanatory power to a variety of expectation formation models by focusing on the learning factor. Whereas the rational expectations paradigm offers the prevailing method to determining expectations, it assumes very theoretical knowledge on the part of economic actors. Evans and Honkapohja contribute to a growing body of research positing that households and firms learn by making forecasts using observed data, updating their forecast rules over time in response to errors. This book is the first systematic development of the new statistical learning approach. Depending on the particular economic structure, the economy may converge to a standard rational-expectations or a "rational bubble" solution, or exhibit persistent learning dynamics. The learning approach also provides tools to assess the importance of new models with expectational indeterminacy, in which expectations are an independent cause of macroeconomic fluctuations. Moreover, learning dynamics provide a theory for the evolution of expectations and selection between alternative equilibria, with implications for business cycles, asset price volatility, and policy. This book provides an authoritative treatment of this emerging field, developing the analytical techniques in detail and using them to synthesize and extend existing research.
Author: Martin Weale
Publisher: Routledge
ISBN: 1317379438
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
This analysis of macroeconomic policy, originally published in 1989, argues that key government objectives, such as reduced inflation, decreased unemployment and an adequate level of national saving can be achieved only by employing both monetary and fiscal policies, in conjunction with supply-side policies expressly designed to improve the workings of the labour market. Part 1 is a comparative analysis showing the effects of monetary and fiscal policy on the economy. Real-wage rigidity in the labour market is shown to have important consequences for the working of both types of policy, because it conditions the economy’s response to tax changes. Part 2 presents an econometric model which combines consistent stock-flow accounts with a full range of expectational effects. Part 3 presents an innovative technique for solving rational expectations models with the need for arbitary terminal conditions.
