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Constrained macroeconomic policy development with a separate predictive model

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  • Herbert, Ric D
  • Bell, Rod D

Abstract

This paper examines the issue of the generation of optimal control policies where there are explicit constraints upon the control values and there is limited knowledge of the complex economic system. The paper develops a methodology where the constrained optimal control is based upon a separate model that predicts the policy targets for the economic system. The methodology as applied to a small calibrated macroeconomic model of Australia.

Suggested Citation

  • Herbert, Ric D & Bell, Rod D, 2004. "Constrained macroeconomic policy development with a separate predictive model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 64(3), pages 467-476.
    • Handle: RePEc:eee:matcom:v:64:y:2004:i:3:p:467-476
    DOI: 10.1016/S0378-4754(03)00112-5
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    References listed on IDEAS

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    1. Powell, Alan A., 2000. "From Dornbusch to Murphy: Stylized Monetary Dynamics of a Contemporary Macroeconometric Model," Journal of Policy Modeling, Elsevier, vol. 22(1), pages 99-116, January.
    2. Orphanides, Athanasios & Wieland, Volker, 2000. "Inflation zone targeting," European Economic Review, Elsevier, vol. 44(7), pages 1351-1387, June.
    3. Murphy, C W, 1988. "An Overview of the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 175-199, Supplemen.
    4. Neck, Reinhard & Matulka, Josef, 1994. "Stochastic optimum control of macroeconometric models using the algorithm OPTCON," European Journal of Operational Research, Elsevier, vol. 73(2), pages 384-405, March.
    5. Murphy, C W, 1988. "Rational Expectations in Financial Markets and the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 61-88, Supplemen.
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    Cited by:

    1. Gareth D Leeves & Ric D Herbert, 2004. "Comparison of Optimal Control Solutions in a Labor Market Model," Computing in Economics and Finance 2004 98, Society for Computational Economics.
    2. Zafra-Cabeza, Ascensión & Ridao, Miguel A. & Camacho, Eduardo F., 2008. "Using a risk-based approach to project scheduling: A case illustration from semiconductor manufacturing," European Journal of Operational Research, Elsevier, vol. 190(3), pages 708-723, November.

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