Federal Reserve Bank of San Francisco
Working Paper Series
Optimal policy in rational-expectations models: new solution algorithms
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.
Cite this item
Richard Dennis, Optimal policy in rational-expectations models: new solution algorithms, Federal Reserve Bank of San Francisco, Working Paper Series 2001-09, 2001.
Keywords: Monetary policy ; Rational expectations (Economic theory)
This item with handle RePEc:fip:fedfwp:2001-09
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