Solving for Optimal Simple Rules in Rational Expectations Models

Richard Dennis

No 30, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: This paper presents techniques to solve for optimal simple monetary policy rules in rational expectations models. Both pre-commitment and discretionary solutions are considered. The techniques described are notable for the flexibility they provide over the structure of the policy rule being solved for. Specifically, not all state variables need enter the rule. This allows rules optimal, conditional on a specified information set or structure, to be easily constructed. The algorithms are illustrated through application to the models in Clarida, Gali, and Gertler (1999) and Rudebusch (2000).

Keywords: Rational expectations; Discretion; Pre-commitment; Policy evaluation (search for similar items in EconPapers)
JEL-codes: C61 C62 E58 (search for similar items in EconPapers)
Date: 2001-04-01
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Citations: View citations in EconPapers (5)

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Journal Article: Solving for optimal simple rules in rational expectations models (2004)
Working Paper: Solving for Optimal Simple Rules in Rational-Expectations Models (2003)
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