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On Linear Quadratic Approximations

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  • Debortoli, Davide
  • Nunes, Ricardo

Abstract

We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so, the timeless perspective assumption is crucial.

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File URL: http://mpra.ub.uni-muenchen.de/544/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 544.

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Date of creation: Jul 2006
Date of revision: Jul 2006
Handle: RePEc:pra:mprapa:544

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Keywords: Linear-Quadratic Approximation; Distorted Steady State; Timeless Perspective;

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References

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  1. Pierpaolo Benigno & Michael Woodford, 2004. "Optimal taxation in an RBC model: A linear-quadratic approach," Discussion Papers 0405-16, Columbia University, Department of Economics.
  2. Kim, Jinill & Kim, Sunghyun Henry, 2003. "Spurious welfare reversals in international business cycle models," Journal of International Economics, Elsevier, vol. 60(2), pages 471-500, August.
  3. Albert Marcet & Ramon Marimon, 2011. "Recursive Contracts," Economics Working Papers ECO2011/15, European University Institute.
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Citations

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Cited by:
  1. Michael Reiter & Alexander Ludwig, 2009. "Sharing Demographic Risk – Who is Afraid of the Baby Bust?," 2009 Meeting Papers 389, Society for Economic Dynamics.
  2. Damjanovic, Tatiana & Damjanovic, Vladislav & Nolan, Charles, 2011. "Ordering Policy Rules with an Unconditional Welfare Measure," SIRE Discussion Papers 2011-16, Scottish Institute for Research in Economics (SIRE).
  3. Oleksiy Kryvtsov & Malik Shukayev & Alexander Ueberfeldt, 2008. "Adopting Price-Level Targeting under Imperfect Credibility," Working Papers 08-3, Bank of Canada.
  4. Sebastian Sienknecht, 2010. "On the Informational Loss Inherent in Approximation Procedures: Welfare Implications and Impulse Responses," Jena Economic Research Papers 2010-005, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  5. Davide Debortoli & Ricardo Nunes, 2007. "Loose commitment," International Finance Discussion Papers 916, Board of Governors of the Federal Reserve System (U.S.).
  6. Oleksiy Kryvtsov & Malik Shukayev & Alexander Ueberfeldt, 2008. "Adopting Price-Level Targeting under Imperfect Credibility: An Update," Working Papers 08-37, Bank of Canada.
  7. Ambler, Steve & Pelgrin, Florian, 2010. "Time-consistent control in nonlinear models," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2215-2228, October.
  8. Davide Debortoli & Junior Maih & Ricardo Nunes, 2011. "Loose commitment in medium-scale macroeconomic models: theory and applications," International Finance Discussion Papers 1034, Board of Governors of the Federal Reserve System (U.S.).

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