We study optimal policy when the planner has partial information in a general setup where observed signals are endogenous to policy. In this context, signal extraction and policy have to be determined jointly. We derive a general non-standard first order condition of optimality from first...

This paper studies optimal policy in models with multidimensional uncertainty and endogenous observables. We first consider a very general setup where the policy-maker does not observe the realisations of the shocks that hit the economy, but only some aggregate variables that are endogenous with...