TY  - JOUR
AU  - Buiter,Willem H.
TI  - Policy evaluation and design for continuous time linear rational expectations models:  some recent development
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 34
PY  - 1984
Y2  - April 1984
UR  - http://www.nber.org/papers/t0034
L1  - http://www.nber.org/papers/t0034.pdf
N1  - Author contact info:
Willem H. Buiter
Citigroup Centre
Canada Square, Canary Wharf
London E14 5LB
UNITED KINGDOM
E-Mail: willembuiter@btinternet.com
AB  - The paper surveys some recent developments in policy evaluation and design in continuous time linear rational expectations models. Much recent work in macroeconomics and open economy macroeconomics fits into this category. First the continuous time analogue is reviewed of the discrete time solution method of Blanchard and Kahn. Some problems associated with this solution method are then discussed, including non-uniqueness and zero roots. Optimal (but in general time-inconsistent) and time-consistent (but in general suboptimal) solutions are derived to the general linear-quadratic optimal control problem, based on work by Calvo, Driffill, Miller and Salmon and the author. A numerical example is solved, involving optimal and time-consistent anti-inflationary policy design in a contract model.
ER  -