Constrained Optimal Control Under Limited Knowledge

Ric D. Herbert and Rod D. Bell

No 14, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: This paper examines the issue of the generation of optimal control policies where there are explicit constraints upon the control values and there is limited knowledge of the complex economic system. The paper develops a methodology where the constrained optimal control is based upon a learning model that predicts the policy targets for the economic system. A subset of the control policy is applied to the economic system and from the response of the system a new predictive model and resultant optimal controls are generated. The methodology is then repeated. Numeric examples of the methodology as applied to a macroeconomic model are presented in the paper.

Keywords: Constrained Optimal Control; Monetary Policy (search for similar items in EconPapers)
JEL-codes: C61 C63 E61 (search for similar items in EconPapers)
Date: 2001-04-01
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