Optimal Economic Stabilization Policy: An Extended Framework

Benjamin Morton Friedman

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper outlines an optimization framework which extends the familiar Tinbergen-Theil model in two ways. First, a "piecewise quadratic" replaces the standard quadratic objective function. Second, the time horizon of the optimization becomes, within the context of economic stabilization problems, endogenous to the optimization process itself. The purpose of both extensions is to escape the conceptual restrictiveness of the Tinbergen-Theil structure while preserving the practical convenience of that model for applied policy work. The paper also describes a solution algorithm incorporating these two extensions, and it presents the results of a sample computational application based on the 1957-58 recession.

Date: 1972
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Citations: View citations in EconPapers (8)

Published in Journal of Political Economy -Chicago-

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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:4554308

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