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http://hdl.handle.net/10419/53771
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| Title: | | Computing optimal policy in a timeless-perspective: An application to a small-open economy  |
| Authors: | | Juillard, Michel Pelgrin, Florian |
| Issue Date: | | 2007 |
| Series/Report no.: | | Bank of Canada Working Paper 2007,32 |
| Abstract: | | Since the contribution of Kydland and Prescott (1977), it is well known that the optimal Ramsey policy is time inconsistent. In a series of recent contributions, Woodford (2003) proposes a new methodology to circumvent this problem, namely the timeless perspective solution. However, one main limitation is that it is not yet empirically implementable. In this paper, we develop a new methodology to compute initial values of the Lagrange multipliers in order to implement the timeless-perspective solution. In so doing, we also provide a generalization of the Ramsey and timeless-perspective problems. We apply our results to a small-open economy model in Canada. |
| Subjects: | | Monetary policy framework |
| JEL: | | C6 E5 E6 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bank of Canada Working Papers
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