Unconditionally Optimal Ramsey policy

Damjanovic, T.; Damjanovic, V.; Nolanz, 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 ëforward guidanceí, 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., & Nolanz, C. (2021). Unconditionally Optimal Ramsey policy. Journal of Macroeconomics, 69, Article 103346. https://doi.org/10.1016/j.jmacro.2021.103346

• Journal Article Type: Article
• Acceptance Date: Jun 28, 2021
• Online Publication Date: Jul 16, 2021
• Publication Date: 2021-09
• Deposit Date: Jul 12, 2021
• Publicly Available Date: Jul 16, 2022
• Journal: Journal of Macroeconomics
• Print ISSN: 0164-0704
• Electronic ISSN: 1873-152X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 69
• Article Number: 103346
• DOI: https://doi.org/10.1016/j.jmacro.2021.103346
• Public URL: https://durham-repository.worktribe.com/output/1245734