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Uncertainty, Political Preferences, and Stabilization: Stochastic Control Using Dynamic CGE Models

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  • Seung-Rae Kim

    (Woodrow Wilson School, 409 Robertson Hall, Princeton University, Princeton, NJ 08544-1013, U.S.A.)

Abstract

This paper is a step toward the merger of optimal control models with dynamic computable general equilibrium (CGE) models. It demonstrates the usefulness of CGE techniques in control theory application and provides a practical guideline to policymakers in this relatively new field. Uncertainty, short-term quantity adjustment processes, and sector-specific political preferences are taken into account in exploring what time paths of adjustments of the economy would be optimal for a government with explicit policy goals. The experimental results highlight the importance of the structures of political preferences and uncertainty when performing optimal stabilization policy exercises.

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  • Seung-Rae Kim, 2004. "Uncertainty, Political Preferences, and Stabilization: Stochastic Control Using Dynamic CGE Models," Computational Economics, Springer;Society for Computational Economics, vol. 24(2), pages 97-116, September.
    • Handle: RePEc:kap:compec:v:24:y:2004:i:2:p:97-116
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    Cited by:

    1. mercado, p. ruben, 2003. "Empirical economywide modeling in argentina," MPRA Paper 58611, University Library of Munich, Germany.
    2. Joshua Elliott & Meredith Franklin & Ian Foster & Todd Munson & Margaret Loudermilk, 2012. "Propagation of Data Error and Parametric Sensitivity in Computable General Equilibrium Models," Computational Economics, Springer;Society for Computational Economics, vol. 39(3), pages 219-241, March.

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