Debortoli, Davide; Maih, Junior; Nunes, Ricardo - Federal Reserve Board (Board of Governors of the … - 2011
This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment. As opposed to the existing literature, our method can be employed in medium- and large-scale models typically used in monetary policy. We apply our method to the Smets and Wouters (2007) model, where...