The limits of counter-cyclical monetary policy: an analysis based on optimal control theory and vector autoregressions

Robert Litterman

No 297, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Optimal control theory can be combined with the probability structure of a vector autoregression to investigate the tradeoffs available to policymakers. Such an approach obtains results based on a minimal set of assumptions about the economy and the structure of policy actions. This paper takes this approach to analyze the potential effectiveness of countercyclical monetary policy.

Date: 1986
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Journal Article: The Limits of Counter-Cyclical Monetary Policy: an Analysis Based on Optimal Control Theory and Vector Autoregressions (1987)
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