The optimal control literature traditionally analyzes linear-quadratic Gaussian (LQG) formulations of macroeconomic policy design where policy planers seek to minimize the distance between a direct target vector y and a vector of aspiration levels y*, using a suitably dimensioned matrix M as a...

This paper develops a piecewise linear toolkit for optimal policy analysis of linear rational expectations models, subject to occasionally binding constraints on (multiple) policy instruments and other variables. Optimal policy minimises a quadratic loss function under either commitment or...

Recent experience with interest rates hitting the effective lower bound and agents facing binding borrowing constraints has emphasised the importance of understanding the behaviour of an economy in which some variables may be restricted at times. The extended path algorithm is a commonly used...