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Dynamic Optimization under Uncertainty: A Case Study for Austrian Macroeconomic Policies

Author

Listed:
  • Reinhard Neck

    (Alpen-Adria-Universität Klagenfurt)

  • Sohbet Karbuz

    (Association of Mediterranean Energy Companies)

Abstract

Results from optimum control problems with uncertain parameters are investigated in a numerical case study for Austria. Optimal budgetary policies are calculated under varying assumptions about stochastic parameters within the framework of a problem of quantitative economic policy. An intertemporal objective function is minimized subject to the constraints of a small macroeconometric model, and approximately optimal values for federal budget expenditures and revenues are determined. It is shown that the deterministic and the fully stochastic optimal policies are rather similar. If only some parameters are assumed to be stochastic, or if covariances between different parameters are not taken into account, on the other hand, optimization results can be very different from deterministic or fully stochastic optimization results.

Suggested Citation

  • Reinhard Neck & Sohbet Karbuz, 2017. "Dynamic Optimization under Uncertainty: A Case Study for Austrian Macroeconomic Policies," Proceedings of International Academic Conferences 5808250, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:5808250
    as

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    File URL: https://iises.net/proceedings/33rd-international-academic-conference-vienna/table-of-content/detail?cid=58&iid=049&rid=8250
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    References listed on IDEAS

    as
    1. Amman, Hans M & Kendrick, David A, 1999. "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Computational Economics, Springer;Society for Computational Economics, vol. 14(3), pages 263-267, December.
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    More about this item

    Keywords

    optimal control; fiscal policy; stochastic control; stochastic parameters; econometric models;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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