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Sequential Action and Beliefs under Partially Observable DSGE Environments

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  • Seong-Hoon Kim

Abstract

This paper introduces a classification of DSGEs from a Markovian perspective, and positions the class of POMDP (Partially Observable Markov DecisionProcess) to the center of a generalization of linear rational expectations models. The analysis of the POMDP class builds on the previous development in dynamic controls for linear system, and derives a solution algorithm by formulating the equilibrium as a fixed point of an operator that maps what we observe into what we believe.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp1116.pdf
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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 201116.

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Date of creation: 15 Dec 2011
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Handle: RePEc:san:cdmawp:1116

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Web page: http://www.st-andrews.ac.uk/cdma
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Keywords: DSGE; Partially Observable Markov Decision Process (POMDP); Observation Channel; Kalman filter.;

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  16. Vasco Curdia, 2008. "Optimal Monetary Policy under Sudden Stops," 2008 Meeting Papers 474, Society for Economic Dynamics.
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  18. Svensson, Lars E. O. & Woodford, Michael, 2001. "Indicator Variables for Optimal Policy under Asymmetric Information," Seminar Papers 689, Stockholm University, Institute for International Economic Studies.
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