This paper, written for a Federal Reserve Staff Review of Monetary Control Procedures, explores the short-run volatility consequences of money stock targeting procedures under current (1981) alternative operating procedures. Conclusions include: the odds are at least two to one that a portion of...

Among the many troublesome econometric relationships, the demand for money has proved especially recalcitrant, as evidenced by a long history of tinkering with basic specifications, always in response to some recent perceived forecast failure. The shortcomings of this approach and an alternative...

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 is a discussion and critique of "Recent Developments in Price Dynamics" by William D. Nordhaus and a distillation of my previous work on the subject. Its main contribution is the proposition that, contrary to previous literature, if prices move dynamically due to optimization, then...

This paper explores Knightian model uncertainty about dynamic misspecification as a possible explanation of the considerable difference between estimated interest rate rules and optimal feedback descriptions of monetary policy. In the literature on robust control, Knightian uncertainty about a...

This paper studies an endogenous growth economy with two sectors owned by a life-time utility maximizing representative household, one sector producing consumption goods and the other sector producing knowledge and technology. The stationary Euler conditions are used to derived relationships...

The real output effects of disinflation are shown to depend not only on whether inflation is flexible or persistent, but also on the type of policy rule used by the monetary authority to implement disinflation. This paper contrasts the consequences of a planned reduction in inflation for (1) an...

This paper examines the properties of interest rate rules aimed at controlling aggregate price inflation. Policies are compared in two models having either flexible or sticky inflation The latter is assumed to derive from a traditional, adaptive-expectations augmented Phillips curve. The...

This paper derives a general-equilibrium model from assumptions that mimic those embodied in the Federal Reserve Board's Quarterly Model of the United States (FRB/US). The aim is to produce a conceptual framework with which to analyze the dynamic and steady-state properties of the newly...

This paper analyses an empirical, dynamic optimization-based model of factor demand for n quasi-fixed factors in US industries, under the assumption that firms produce output to stock subject to polynomial adjustment costs. Each factor and the stock of inventories adjust to discrepancies in all...