Machine Learning a Ramsey Plan

Thomas J. Sargent and Ziyue Yang

Quarterly Review, 2025, vol. 45, issue 1

Abstract: We use a Python program to calculate a pair of infinite sequences of money creation and price level inflation rates that maximize a benevolent time 0 government’s quadratic objective function for a linear-quadratic version of Calvo (1978). The program computes an open-loop representation of the optimal plan and an associated monotonically declining, bounded from below sequence of continuation values whose limit is a worst continuation value that is associated with a “timeless perspective”. We run some least squares regressions on fake data to try to learn about the structure of the optimal plan but are stymied by not knowing which variables should be on the right and left sides of our regressions. We use literary arguments to decide this question, but they are inconclusive.

Keywords: Time inconsistency; Artificial intelligence; Money supply; Inflation; Closed loop; Fake data; Machine learning; Open loop; Ramsey plan (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmqr:101143

DOI: 10.21034/qr.4511

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