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Hall and Taylor´s and John Taylor´s Model in DUALI

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  • Mercado, Ruben
  • Kendrick, David

Abstract

This paper, and its accompanying programs, provide a practical introduction to macroeconomic policy analysis methods and show how to implement in DUALI deterministic and stochastic simulations with standard and rational expectations models. The analysis of the general properties of dynamic economic systems is a complex task, facilitated by the application of some theoretical results and relatively simple simulation techniques. Dynamic optimal policy analysis is more demanding, usually requiring of specialized software. DUALI is an optimal control software which is able to generate sophisticated deterministic and stochastic simulation environments and to compute, among other things, the optimal feedback rule and the implied optimal paths for target variables and policy tools. Our general goals here are: a) to introduce the use of some concepts for the analysis of dynamic properties of economic systems b) to introduce the use of DUALI to perform deterministic and stochastic dynamic optimal policy analysis. As a practical illustration of solution concepts and computational techniques, we use Robert Hall and John Taylor’s open economy-flexible exchange rate model, and John Taylor’s closed economy model with rational expectations and staggered contracts.

Suggested Citation

  • Mercado, Ruben & Kendrick, David, 1998. "Hall and Taylor´s and John Taylor´s Model in DUALI," MPRA Paper 111974, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111974
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    File URL: https://mpra.ub.uni-muenchen.de/111974/1/MPRA_paper_111974.pdf
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    References listed on IDEAS

    as
    1. Amman, Hans M. & Kendrick, David A., 1998. "Computing the steady state of linear quadratic optimization models with rational expectations," Economics Letters, Elsevier, vol. 58(2), pages 185-191, February.
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    3. P. Ruben Mercado & David A. Kendrick, 1997. "TAYGAMS: John Taylor's Two-Country Model in GAMS," CARE Working Papers 9703, The University of Texas at Austin, Center for Applied Research in Economics.
    4. Amman, Hans M & Kendrick, David A, 1999. "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Computational Economics, Springer;Society for Computational Economics, vol. 14(3), pages 263-267, December.
    5. Amman, Hans M. & Kendrick, David A. & Achath, Sudhakar, 1995. "Solving stochastic optimization models with learning and rational expectations," Economics Letters, Elsevier, vol. 48(1), pages 9-13, April.
    6. Amman, Hans & Kendrick, David, 1999. "Linear-Quadratic Optimization For Models With Rational Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 3(4), pages 534-543, December.
    7. Mercado, P Ruben & Kendrick, David A & Amman, Hans, 1998. "Teaching Macroeconomics with GAMS," Computational Economics, Springer;Society for Computational Economics, vol. 12(2), pages 125-149, October.
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    More about this item

    Keywords

    Hall and Taylor Model -John Taylor Model - Macroeconimics in DUALI;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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