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How Should Control Theory be Used by a Time-Consistent Government?

Cohen, Daniel; Michel, Philippe - C.E.P.R. Discussion Papers - 1986

It has been recognized that the optimal strategy of a government is generally time-inconsistent: optimality requires that the government take into account expectations effects in the formulation of its policy and to ignore these effects when applying the policy. In order to analyse the problem,...

Persistent link: https://www.econbiz.de/10005666548

Optimal Monetary Policy using a VAR

Polito, Vito; Wickens, Michael R. - C.E.P.R. Discussion Papers - 2008

In this paper we propose a new way to formulate optimal policy based on a quadratic intertemporal welfare function where the dynamic constraint is based on a VAR model of the economy which we call the PVAR method. We argue that the VAR under control should not be derived simply by replacing the...

Persistent link: https://www.econbiz.de/10005497823

Optimal fiscal policy

Lukkezen, Jasper; Teulings, Coen N - C.E.P.R. Discussion Papers - 2013

This paper derives and estimates rules for fiscal policy that prescribe the optimal response to changes in unemployment and debt. We combine the reducedform model of the economy from a linear VAR with a non-linear welfare function and obtain analytic solutions for optimal policy. The variables...

Persistent link: https://www.econbiz.de/10011084121

Optimal Control and Filtering in Linear Forward-looking Economies: A Toolkit

Gerali, Andrea; Lippi, Francesco - C.E.P.R. Discussion Papers - 2003

We provide algorithms to solve a linear-quadratic optimal control problem with commitment. By extending to the case of imperfect information a procedure outlined in Ljungqvist and Sargent (2002), we make the results of Svensson and Woodford (2000) easy to implement. We provide a Mat-lab package...

Persistent link: https://www.econbiz.de/10005661950

Experimentation in Two-Sided Markets

Peitz, Martin; Rady, Sven; Trepper, Piers - C.E.P.R. Discussion Papers - 2011

We study optimal experimentation by a monopolistic platform in a two-sided market framework. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profit stream in a continuous-time...

Persistent link: https://www.econbiz.de/10009371477

Optimal Target Criteria for Stabilization Policy

Giannoni, Marc; Woodford, Michael - C.E.P.R. Discussion Papers - 2010

This paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong...

Persistent link: https://www.econbiz.de/10008468673

Macroeconomic Policy Design and Control Theory - A Failed Partnership?

Currie, David - C.E.P.R. Discussion Papers - 1984

This paper provides a general review of recent developments in the application of control theory to macroeconomic policy design. It starts by highlighting the crucial difference between the engineering and economic control problem, in that the latter, unlike the former, is concerned with the...

Persistent link: https://www.econbiz.de/10005791518

Performance Pay, CEO Dismissal, and the Dual Role of Takeovers

Burkart, Mike; Raff, Konrad - C.E.P.R. Discussion Papers - 2012

We propose that an active takeover market provides incentives by offering acquisition opportunities to successful … performance-based pay are non-monotonic in the intensity of the takeover threat. In firms with weak boards, turnover (performance …-based pay) increases (decreases) with the intensity of the takeover threat. When choosing its acquisition policy and the quality …

Persistent link: https://www.econbiz.de/10011083799

Macroeconomic Consequences of Terror: Theory and the Case of Israel

Eckstein, Zvi; Tsiddon, Daniel - C.E.P.R. Discussion Papers - 2004

relative to the present is reduced. Hence, due to a rise in terror activity, investment goes down, and in the long run income …

Persistent link: https://www.econbiz.de/10005504271

Decentralized Trade, Entrepreneurial Investment and the Theory of Unemployment

Coles, Melvyn G - C.E.P.R. Discussion Papers - 1996

and investment, so it may take some time before an unemployed worker finds a job. Wages are determined by bargaining. A … subsidize entrepreneurial investment (there is a wage bargaining distortion and a search externality), simulations show that the …

Persistent link: https://www.econbiz.de/10005504418