Computational methods both open the frontiers of economic analysis and serve as a bottleneck in what can be achieved. Using the quantum Monte Carlo (QMC) algorithm, we are the first to study whether quantum computing can improve the run time of economic applications and challenges in doing so....

This paper shows the inappropriatedness of approximation procedures for welfare rankings across suboptimal policy strategies. On the grounds of a simple general equilibrium model, we find that even commonly accepted techniques are not suitable to achieve accurate welfare orderings. This result...

The breakdown of the interbank money markets in the face of the recent financial crisis has forced central banks and governments to take extraordinary measures to sustain financial stability. In this paper we investigate which influence central bank activity has on interbank markets. In our...

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...

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...

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...

Although the concept of monetary policy lag has historical roots deep in the monetary economics literature, relatively little attention has been paid to the idea. In this paper, we build on Svensson's (1997) inflation targeting framework by explicitly taking into account the lagged effect of...

An accommodating monetary policy followed by a sudden increase of the short term interest rate often leads to a bubble burst and to an economic slowdown. Two examples are the Great Depression of 1929 and the Great Recession of 2008. Through the implementation of an Agent Based Model with a...

When choosing a strategy for monetary policy, policymakers must grapple with mismeasurement of labor market slack, and of the responsiveness of price inflation to that slack. Using stochastic simulations of a small-scale version of the Federal Reserve Board’s principal New Keynesian...

We develop a macroeconomic agent-based model to study how financial instability can emerge from the co-evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy. The model is populated by heterogenous firms, consumers, and banks that locally...