This paper develops and estimates a dynamic general equilibrium model that realistically accounts for an input-output linkage between firms operating at different stages of processing. Firms face technological change which is specific to their processing stage and charge new prices according to...

We show how to use optimal control theory to derive optimal time-consistent Markov-perfect government policies in nonlinear dynamic general equilibrium models, extending the result of Cohen and Michel (1988) for models with quadratic objective functions and linear dynamics. We replace private...