Rational expectations models with anticipated shocks and optimal policy: a general solution method and a New Keynesian example

The purpose of this paper is to show how to solve linear dynamic rational expectations models with anticipated shocks by using the generalized Schur decomposition method. Furthermore, we determine the optimal unrestricted and restricted policy responses to anticipated shocks. We demonstrate our solution method by means of a micro-founded hybrid New Keynesian model and show that anticipated cost-push shocks entail higher welfare losses than unanticipated shocks of equal size.

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Year of publication:	2009
Authors:	Wohltmann, Hans-Werner ; Winkler, Roland C.
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Schock \| Rationale Erwartung \| Ungleichgewichtstheorie \| Mikroökonomische Fundierung \| Dynamisches Modell \| Dekompositionsverfahren \| Geldpolitik \| Wohlfahrtseffekt \| Theorie \| Anticipated Shocks \| Optimal Monetary Policy \| Rational Expectations \| Generalized Schur Decomposition \| Welfare Effects

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Series:	Kiel Working Paper ; 1507
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	598258795 [GVK] hdl:10419/28335 [Handle] RePEc:zbw:ifwkwp:1507 [RePEc]
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C63 - Computational Techniques ; E52 - Monetary Policy (Targets, Instruments, and Effects)
Source:	EconStor

Persistent link: https://www.econbiz.de/10010277244