Design limits and dynamic policy analysis

William Brock, Steven Durlauf and Giacomo Rondina

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 12, 2710-2728

Abstract: This paper characterizes the frequency domain properties of feedback control rules in linear systems in order to better understand how different policies affect outcomes frequency by frequency. We are especially concerned in understanding how reductions of variance at some frequencies induce increases in variance at others. Tradeoffs of this type are known in the control literature as design limits. Design limits are important in understanding the full range of effects of macroeconomic stabilization policies. We extend existing results to account for discrete time bivariate systems with rational expectations. Application is made to the evaluation of monetary policy rules.

Keywords: Design limits; Stabilization policy; Frequency domain; Monetary policy rules (search for similar items in EconPapers)
JEL-codes: C52 E6 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (14)

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Working Paper: Design Limits and Dynamic Policy Analysis (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:12:p:2710-2728

DOI: 10.1016/j.jedc.2013.07.008

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