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A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables

Jean-Bernard Chatelain () and Kirsten Ralf

PSE Working Papers from HAL

Abstract: This algorithm extends Ljungqvist and Sargent (2012) algorithm of Stackelberg dynamic game to the case of dynamic stochastic general equilibrium models including exogenous forcing variables. It is based on Anderson, Hansen, McGrattan, Sargent (1996) discounted augmented linear quadratic regulator. It adds an intermediate step in solving a Sylvester equation. Forward-looking variables are also optimally anchored on forcing variables. This simple algorithm calls for already programmed routines for Riccati, Sylvester and Inverse matrix in Matlab and Scilab. A final step using a change of basis vector computes a vector auto regressive representation including Ramsey optimal policy rule function of lagged observable variables, when the exogenous forcing variables are not observable.

Keywords: augmented linear quadratic regulator; Ramsey optimal policy; Stackelberg dynamic game; algorithm; forcing variables (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp
Date: 2017-09
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01588188
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Related works:
Working Paper: A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables (2019) Downloads
Working Paper: A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables (2017) Downloads
Working Paper: A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables (2017) Downloads
Working Paper: A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables (2017) Downloads
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