A Timeless Perspective on Optimality in Forward-Looking Rational Expectations Models
This paper discusses the `timeless perspective' optimisation concept with reference to a much-studied forward-looking rational expectations model. We establish that this policy, as usually described, is not always superior to a time consistent alternative on the basis of the stochastic equilibrium. We derive an alternative `timelessly optimal' rule which is globally optimal with respect to the unconditional variance and is therefore more supportable as a time consistent equilibrium.
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|Date of creation:||Oct 2001|
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