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Approximations to viability kernels for sustainable macroeconomic policies

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  • Krawczyk, Jacek
  • Pharo, Alastair
  • Simpson, Mark

Abstract

Maintaining an open economy within certain bounds on inflation, output gap and exchange rate can help sustainable economic development. Macroeconomics proposes monetary-policy models that describe evolution of the above quantities. We use one such model, constituted by a four-metastate one-control system, to compute viability kernel approximations that one can use to assist the central bank to establish "sustainable" policies. We propose a simple heuristic algorithm that leads to kernel approximations for this and similar models.

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File URL: http://researcharchive.vuw.ac.nz/handle/10063/1531
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Bibliographic Info

Paper provided by Victoria University of Wellington, School of Economics and Finance in its series Working Paper Series with number 1531.

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Date of creation: 2011
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Handle: RePEc:vuw:vuwecf:1531

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Postal: Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand
Phone: +64 (4) 463-5353
Fax: +64 (4) 463-5014
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Web page: http://www.victoria.ac.nz/sef
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Keywords: monetary policy; viability kernel; algorithm; MATLAB;

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  1. KRAWCZYK, Jacek B. & SEREA, Oana-Silvia, 2009. "A viability theory approach to a two-stage optimal control problem of technology adoption," CORE Discussion Papers 2009004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jacek Krawczyk & Rishab Sethi, 2007. "Satisficing Solutions for New Zealand Monetary Policy," Reserve Bank of New Zealand Discussion Paper Series DP2007/03, Reserve Bank of New Zealand.
  3. Bene, C. & Doyen, L. & Gabay, D., 2001. "A viability analysis for a bio-economic model," Ecological Economics, Elsevier, vol. 36(3), pages 385-396, March.
  4. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
  5. Seppo Honkapohja & Kaushik Mitra, 2006. "Learning Stability in Economies with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 284-309, April.
  6. Dominique Pujal & Patrick Saint-Pierre, 2006. "Capture Basin Algorithm for Evaluating and Managing Complex Financial Instruments," Computing in Economics and Finance 2006 186, Society for Computational Economics.
  7. Martinet, V. & Doyen, L., 2007. "Sustainability of an economy with an exhaustible resource: A viable control approach," Resource and Energy Economics, Elsevier, vol. 29(1), pages 17-39, January.
  8. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530 Elsevier.
  9. Jacek B. Krawczyk & Kunhong Kim, 2006. "A Viable Solution to a Small Open-Economy Monetary Policy Problem," Computing in Economics and Finance 2006 188, Society for Computational Economics.
  10. Jeffrey C. Fuhrer, 1994. "Optimal monetary policy in a model of overlapping price contracts," Working Papers 94-2, Federal Reserve Bank of Boston.
  11. Krawczyk, Jacek & Kim, Kunhong, 2009. "Satisficing Solutions To A Monetary Policy Problem," Macroeconomic Dynamics, Cambridge University Press, vol. 13(01), pages 46-80, February.
  12. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, January.
  13. FILAR, Jerzy A. & KRAWCZYK, Jacek B. & AGRAWAL, Manju, 2009. "On production and abatement time scales in sustainable development. Can we loosen the sustainability screw ?," CORE Discussion Papers 2009028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Martinet, Vincent & Thebaud, Olivier & Doyen, Luc, 2007. "Defining viable recovery paths toward sustainable fisheries," Ecological Economics, Elsevier, vol. 64(2), pages 411-422, December.
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