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:	2009-04
Authors:	Wohltmann, Hans-Werner ; Winkler, Roland
Institutions:	Institut für Weltwirtschaft (IfW)
Subject:	Anticipated Shocks \| Optimal Monetary Policy \| Rational Expectations \| Generalized Schur Decomposition \| Welfare Effects

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Extent:	application/pdf
Series:	Kiel Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	27 pages
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/10005700628