A `Timeless Perspective' on Optimality in Forward-Looking Rational Expectations Models
AbstractThis paper discusses the `timeless perspective' optimisation concept with reference to a much-studied forward-looking rational expectations model. We establish that this policy, as usually described, is not always superior to a time consistent alternative on the basis of the stochastic equilibrium. We derive an alternative `timelessly optimal' rule which is globally optimal with respect to the unconditional variance and is therefore more supportable as a time consistent equilibrium.
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Bibliographic InfoPaper provided by National Institute of Economic and Social Research in its series NIESR Discussion Papers with number 188.
Date of creation: Oct 2001
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Other versions of this item:
- Blake, Andrew P., 2002. "A 'Timeless Perspective' on Optimality in Forward-Looking Rational Expectations Models," Royal Economic Society Annual Conference 2002 30, Royal Economic Society.
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