Unconditionally Optimal Ramsey policy

Damjanovic, T.; Damjanovic, V.; Nolan, C.

Abstract

We discuss a time invariant policy which delivers the unconditionally optimal outcomes in purely forward-looking models and Ramsey outcomes in purely backward-looking models. This policy is a product of interaction between two institutions with distinct responsibilities. Motivated by Brendon and Ellison (2015), we think of them as arms of government. One institution is responsible for forward guidance, setting rules which are necessary and su¢ cient to determine private expectations. The second institution implements optimal policy taking expectations as given. The forward guidance rules are designed to maximise the unconditional expectation of the social objectives.

Citation

Damjanovic, T., Damjanovic, V., & Nolan, C. (2017). Unconditionally Optimal Ramsey policy

• Working Paper Type: Working Paper
• Publication Date: Jan 1, 2017
• Deposit Date: Jun 4, 2019
• Publicly Available Date: Jun 5, 2019
• Series Title: Centre for economic growth and policy working papers
• Public URL: https://durham-repository.worktribe.com/output/1167555