Ordering policy rules with an unconditional welfare measure

Tatiana Damjanovic (), Vladislav Damjanovic and Charles Nolan

No 2011-32, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: The unconditional expectation of social welfare is often used to assess alternative macroeconomic policy rules in applied quantitative research. It is shown that it is generally possible to derive a linear-quadratic problem that approximates the exact non-linear problem where the unconditional expectation of the objective is maximised and the steady-state is distorted. Thus, the measure of policy performance is a linear combination of second moments of economic variables which is relatively easy to compute numerically, and can be used to rank alternative policy rules. The approach is applied to a simple Calvo-type model under various monetary policy rules.

Keywords: Linear-quadratic approximation; unconditional expectations; optimal monetary policy; ranking simple policy rules (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Ordering Policy Rules with an Unconditional Welfare Measure (2015)
Working Paper: Ordering Policy Rules with an Unconditional Welfare Measure (2011)
Working Paper: Ordering policy rules with an unconditional welfare measure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:273

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