Monetary Policy as an Optimal Control Problem

optimal monetary policy for the iranian economy: an application of optimal control theory

in this paper we have utilized optimum control procedures to derive an optimum monetary rule for iran’s economy ; assuming the policy makers are using the interest rate as a policy variable. in doing so a dynamic stochastic model with rational expectation was setup. the model is calibrated with the use of previous findings in the literature. the results show that the optimum reacrion of the pol...

1 Optimal Monetary Policy

We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with alternative utility functions to that considered in Nicolini’s related analysis, the direction of the incentive to cheat may depend on the initial level of government debt, with low debt creating an incentive towards surprise deflation, but high debt the reverse. Under discretion, we ...

Optimal Monetary Stabilization Policy∗

Optimal Monetary Policy

This article studies optimal monetary policy when decision-makers in firms choose how much attention they devote to aggregate conditions. When the amount of attention that decision-makers in firms devote to aggregate conditions is exogenous, complete price stabilization is optimal only in response to shocks that cause efficient fluctuations under perfect information. When decision-makers in fir...

monetary policy rule in case of inflation persistency of iran: an optimal control approach

this research follows two aims in case of the iranian economy. first, study of the presence of inflation persistency, and second, looking for an optimal monetary policy rule. results show that inflation in the economy of iran is persistent, in which, short-term and long-term effects of monetary policy should be considered. for this purpose, a loss function for the central bank with arguments of...