Do Chemical Reactors Hold the Solution for Global Economic Crises?

Yochanan Shachmurove and Reuel Shinnar ()
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Reuel Shinnar: Department of Chemical Engineering, The City College of the City University of New York

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: What can economists learn from dynamic partial control of chemical reactors? Both chemical reactors and the economy involve many variables that are difficult to fully predict or control. Thus, this paper suggests the use of partial control, which involves indentifying only the key variables that monitor the system. This idea of observing relatively few variables and enabling policy makers to better control the economy is in line with the contributions of Sargent and Sims, who use a limited number of variables to study monetary and fiscal policies. This approach enables a better distinction between cause and effect in the macroeconomy.

Keywords: partial control; perturbation; steady state; monetary policy; economic growth; manufacturing; sufficiency, chemical reactors; delayed information model; Monte Carlo simulation; Kalman filter estimation (search for similar items in EconPapers)
JEL-codes: E5 F1 F4 L6 P1 R1 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-03-28
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