Can stabilization policies be efficient?

Aurelien Saidi

No ECO2008/01, Economics Working Papers from European University Institute

Abstract: This paper makes use of optimal control relaxed problems to prove the absence of optimal trajectory in continuous time models with social increasing returns to scale where indeterminacy occurs. Although an efficient optimal policy does not exist, some chattering stabilization policies can mimic trajectories whose criterion functional approximates the supremum of the relaxed problem. This configuration is closely related to indeterminacy: by contrast, when the steady state is determined, an optimal policy is likely to exist.

Keywords: Increasing returns; Indeterminacy; Stabilization policy; Relaxed problems (search for similar items in EconPapers)
JEL-codes: C61 C62 E32 E6 H61 O4 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-mac
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