We investigate whether a government should lead an activist policy in a rigorous utility maximizing framework under rational expectations. The economy is a monetary one with preset wages, and is subject to both demand and supply shocks. It is assumed that the government can never act on the...

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s...

We examine the performance and robustness properties of monetary policy rules in an estimated macroeconomic model in which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge about the true structure of the economy. Policymakers...

The purpose of this paper is to solve linear dynamic rational expectations models with anticipated shocks by using the generalized Schur decomposition method. We also determine the optimal unrestricted and restricted policy responses to temporary as well as permanent shocks which both are...

The purpose of this paper is to show how to solve linear dynamic rational expectations models with anticipated shocks by using the generalized Schur decomposition method. Furthermore, we determine the optimal unrestricted and restricted policy responses to anticipated shocks. We demonstrate our...

We show that, when private sector expectations are determined in line with adaptive learning, optimal policy responds persistently to cost-push shocks. The optimal response is stronger and more persistent, the higher is the initial level of perceived inflation persistence by the private sector....

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework.We find that under flexible inflation targeting and uncertainty in the degree of persistence in the economy, allowing for active learning possibilities has effects on the...

The purpose of this paper is to show how to solve linear dynamic rational expectations models with anticipated shocks by using the generalized Schur decomposition method. Furthermore, we determine the optimal unrestricted and restricted policy responses to anticipated shocks. We demonstrate our...

In diesem Beitrag resümieren wir zunächst die Erfahrungen, welche die EU-Kommission in den letzten vier Jahren mit der Finanzpolitik der EU-Mitgliedsstaaten gesammelt hat. Diese betreffen sowohl die Defizitobergrenze des Stabilitätspakts als auch die jährlich vorzulegenden...