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Title:Rational expectations models with anticipated shocks and optimal policy: a general solution method and a New Keynesian example PDF Logo
Authors:Wohltmann, Hans-Werner
Winkler, Roland C.
Issue Date:2009
Series/Report no.:Kiel working paper 1507
Abstract: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 solution method by means of a micro-founded hybrid New Keynesian model and show that anticipated cost-push shocks entail higher welfare losses than unanticipated shocks of equal size.
Subjects:Anticipated Shocks
Optimal Monetary Policy
Rational Expectations
Generalized Schur Decomposition
Welfare Effects
JEL:C61
C63
E52
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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