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Optimal policy in rational-expectations models: new solution algorithms

Listed author(s):
  • Richard Dennis

This paper develops algorithms that solve for optimal discretionary and optimal pre-commitment policies in rational-expectations models. The techniques developed are simpler to apply than existing methods; they do not require identifying and separating predetermined variables from jump variables, and they eliminate many of the mathematical preliminaries that are required to implement existing methods. The techniques developed are applied to examples to assess the benefits of pre-commitment over discretion.

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File URL: http://www.frbsf.org/economic-research/files/wp01-09bk.pdf
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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2001-09.

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Date of creation: 2001
Handle: RePEc:fip:fedfwp:2001-09
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