The Timing of Uncertainty and The Intensity of Policy

This file is part of IDEAS, which uses RePEc data

The Timing of Uncertainty and The Intensity of Policy

Author Info

P. Ruben Mercado

Abstract

This article analyzes the trade-off between ÏcautionÓ and ÏintensityÓ in the use of the control variable in a one-state one-control dynamic stochastic quadratic linear optimization problem with discount factor. It studies the effects that changes in uncertainty of the control parameter have on the optimal first-period response of the control variable, showing that the trade-off between ÏcautionÓ and ÏintensityÓ depends on the timing of the uncertainty. Given an increase in current uncertainty and an equal increase in future uncertainty, caution will always prevail over intensity. Moreover, the prevalence of caution will be enlarged as the increase in future uncertainty moves farther away into the future, while this prevalence will be reduced as the increase in future uncertainty expands into the future.

Download Info
To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Publisher Info
Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 55.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 01 Apr 2001
Date of revision:
Handle: RePEc:sce:scecf1:55

Contact details of provider:
Email:
Web page: http://www.econometricsociety.org/conference/SCE2001/SCE2001.html
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Find related papers by JEL classification:
C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Statistical Decision Theory; Operations Research
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2001-05-02 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December. [Downloadable!] (restricted)
Other versions:
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The Science of Monetary Policy: A New Keynesian Perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999. [Downloadable!]
- Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Mercado, P. Ruben & Kendrick, David A., 2000. "Caution in macroeconomic policy: uncertainty and the relative intensity of policy," Economics Letters, Elsevier, vol. 68(1), pages 37-41, July. [Downloadable!] (restricted)
Other versions:
- P. Ruben Mercado & David Kendrick, 1999. "Caution in Macroeconomic Policy: Uncertainty and the Relative Intensity of Policy," Computing in Economics and Finance 1999 1343, Society for Computational Economics. [Downloadable!]
Volker Wieland, . "Monetary Policy and Uncertainty about the Natural Unemployment Rate," Computing in Economics and Finance 1997 11, Society for Computational Economics. [Downloadable!]
Other versions:
- Wieland, Volker, 2003. "Monetary Policy and Uncertainty about the Natural Unemployment Rate," CEPR Discussion Papers 3811, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Volker Wieland, 1998. "Monetary policy and uncertainty about the natural unemployment rate," Finance and Economics Discussion Series 1998-22, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
- Volker Wieland, 2003. "Monetary Policy and Uncertainty about the Natural Unemployment Rate," CFS Working Paper Series 2003/05, Center for Financial Studies. [Downloadable!]
Craine, Roger, 1979. "Optimal monetary policy with uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 1(1), pages 59-83, February. [Downloadable!] (restricted)
Turnovsky, Stephen J, 1975. "Optimal Choice of Monetary Instrument in a Linear Economic Model with Stochastic Coefficients," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(1), pages 51-80, February. [Downloadable!] (restricted)
Hans M. Amman & David A. Kendrick, 1996. "The DUALI/DUALPC Software for Optimal Control Models: Introduction," Economics, University of Texas at Austin 9602, Center for Applied Research in Economics. [Downloadable!]
Shupp, Franklin R., 1976. "Uncertainty and optimal stabilization policy," Journal of Public Economics, Elsevier, vol. 6(3), pages 243-253, October. [Downloadable!] (restricted)
Chow, Gregory C, 1973. "Effect of Uncertainty on Optimal Control Policies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 632-45, October. [Downloadable!] (restricted)
Amman, Hans M & Kendrick, David A, 1999. "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Computational Economics, Springer, vol. 14(3), pages 263-67, December. [Downloadable!]
Other versions:
- Hans M. Amman & David Kendrick, . "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Computing in Economics and Finance 1997 8, Society for Computational Economics. [Downloadable!]
- Hans M. Amman & David A. Kendrick, 1997. "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Economics, University of Texas at Austin 9701, Center for Applied Research in Economics. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Arnulfo Rodriguez, 2004. "Robust Control: A Note on the Timing of Model Uncertainty," Computing in Economics and Finance 2004 147, Society for Computational Economics. [Downloadable!]

Statistics

Access and download statistics

Did you know? IDEAS was sponsored from 1997 to 2002 by the Université du Québec à Montréal.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.