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"Evaluating Alternative Monetary Policy
Rules," (with E.P. Howrey),
Journal of Monetary Economics, October 1996, 173-193.
pdf file (1,033KB).
This paper examines monetary policy from an optimal control perspective.
Five loss functions are minimized for each of five models, and the
results are compared. The basic (`true') loss function targets inflation
and unemployment. The other loss functions target, respectively, inflation
alone, unemployment alone, nominal growth alone, and real growth alone.
The five models are two small structural models, two VAR models, and a
large structural model. A numerical procedure is presented that can handle
a variety of loss functions and models.
This paper uses the optimal control framework to examine various monetary
policy rules. The numerical procedure that is proposed handles a wide
variety of loss functions and models.
The solution technique for optimal control problems
in 1974#1 is used for the results for the