TY  - JOUR
AU  - Brock,William A.
AU  - Durlauf,Steven N.
AU  - Rondina,Giacomo
TI  - Design Limits and Dynamic Policy Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14357
PY  - 2008
Y2  - September 2008
UR  - http://www.nber.org/papers/w14357
L1  - http://www.nber.org/papers/w14357.pdf
N1  - Author contact info:
William Brock
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI   537061393
E-Mail: wbrock@ssc.wisc.edu

Steven N. Durlauf
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706-1393
Tel: 608/263-3859
Fax: 608/262-2033
E-Mail: sdurlauf@ssc.wisc.edu

Giacomo Rondina
Department of Economics
University of California at San Diego
La Jolla, CA 92093
E-Mail: grondina@ucsd.edu
AB  - This paper characterizes the frequency domain properties of feedback control rules in linear systems in order to better understand how different rules affect outcomes frequency by frequency.  We are especially concerned in understanding how reductions of variance at some frequencies induce increases in variance at others. Tradeoffs of this type are known in the control literature as design limits.  Design limits are important in understanding the full range of effects of stabilization policies.  We extend existing results to account for discrete time bivariate systems with rational expectations.  Application is made to the evaluation of monetary policy rules.
ER  -