Optimal Control of Nonlinear Dynamic Econometric Models: An Algorithm and an Application

Viktoria Blüschke-Nikolaeva, Dmitri Blüschke and Reinhard Neck (reinhard.neck@aau.at)
Authors registered in the RePEc Author Service: Dmitri Blueschke

No 32, Working Papers from COMISEF

Abstract: In this paper, we present a new version of the OPTCON algorithm for the optimal control of nonlinear stochastic systems with special reference to econometric models. It delivers approximate numerical solutions of optimum control problems with a quadratic objective function for nonlinear econometric models with additive and multiplicative (parameter) uncertainties. The algorithm was programmed in C# and allows for deterministic and stochastic control, the latter with open-loop and passive learning (open-loop feedback) information patterns. We demonstrate the applicability of the algorithm by experiments with a small quarterly macroeconometric model for Slovenia. This shows the convergence and the practical usefulness of the algorithm and (in most cases) the superiority of open-loop feedback over open-loop controls.

Keywords: Optimal control; Stochastic control; Algorithms; Econometric modeling; Policy applications (search for similar items in EconPapers)
Pages: 48 pages
Date: 2010-02-22
New Economics Papers: this item is included in nep-cmp and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Optimal control of nonlinear dynamic econometric models: An algorithm and an application (2012)
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