Ordering policy rules with an unconditional welfare measure

Tatiana Damjanovic (), Vladislav Damjanovic and Charles Nolan

Working Papers from Business School - Economics, University of Glasgow

Abstract: The unconditional expectation of social welfare is often used to assess alternative macroeconomic policy rules in applied quantative research. It is shown that it is generally possible to derive a linear-quadratic problem that approximates the exact non-linear porblem 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)
JEL-codes: E20 E32 F32 F41 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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:gla:glaewp:2011_15

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