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Optimal control of large, forward-looking models efficient solutions and two examples

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Abstract

An optimal control tool is described that is particularly useful for computing rules of large-scale models where users might otherwise have difficulty determining the state vector a priori and where the inversion of large, sparse matrices is involved. A small-scale demonstration is presented, as are data on performance with the Board of Governors large-scale rational expectations macroeconometric model, FRB/US.

Suggested Citation

  • Frederico Finan & Robert J. Tetlow, 1999. "Optimal control of large, forward-looking models efficient solutions and two examples," Finance and Economics Discussion Series 1999-51, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1999-51
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    Cited by:

    1. Levin, Andrew T. & Williams, John C., 2003. "Robust monetary policy with competing reference models," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 945-975, July.
    2. Rochelle M. Edge & Thomas Laubach & John C. Williams, 2010. "Welfare-maximizing monetary policy under parameter uncertainty," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(1), pages 129-143.
    3. Paolo ZAGAGLIA, 2002. "Matlab Implementation of the AIM Algorithm: A Beginner's Guide," Working Papers 169, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Coenen, Gunter, 2007. "Inflation persistence and robust monetary policy design," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 111-140, January.
    5. International Monetary Fund, 2005. "Inflation Targeting and Output Growth: Empirical Evidence for the European Union," IMF Working Papers 2005/089, International Monetary Fund.
    6. ALISTAIR DIEPPE & KEITH KÜSTER & PETER McADAM, 2005. "Optimal Monetary Policy Rules for the Euro Area: An Analysis Using the Area Wide Model," Journal of Common Market Studies, Wiley Blackwell, vol. 43(3), pages 507-537, September.
    7. Richard L. Johnson, 2001. "Fiscal reaction rules in numerical macro models," Research Working Paper RWP 01-01, Federal Reserve Bank of Kansas City.
    8. Nicholas Apergis & Stephen M. Miller & Alexandros Panethimitakis & Athanassios Vamvakidis, 2005. "Inflation Targeting and Output Growth: Evidence from Aggregate European Data," Working papers 2005-06, University of Connecticut, Department of Economics.

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    Keywords

    Econometric models; Macroeconomics;

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