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.
Institutions:	Institut für Volkswirtschaftslehre, Christian-Albrechts-Universität Kiel
Subject:	Anticipated Shocks \| Optimal Monetary Policy \| Rational Expectations \| Generalized Schur Decomposition \| Welfare Effects

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Extent:	application/pdf
Series:	Economics Working Papers. - ISSN 2193-2476.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2009,01
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C63 - Computational Techniques ; E52 - Monetary Policy (Targets, Instruments, and Effects)
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005059008