Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/220350
Authors: 
Chatelain, Jean-Bernard
Ralf, Kirsten
Year of Publication: 
2020
Citation: 
[Journal:] Economics Bulletin [Volume:] 40 [Issue:] 2 [Pages:] 1797-1803 [ISSN:] 1545-2921
Abstract: 
With non-controllable auto-regressive shocks, the welfare of Ramsey optimal policy is the solution of a single Riccati equation of a linear quadratic regulator. The existing theory by Hansen and Sargent (2007) refers to an additional Sylvester equation but miss another equation for computing the block matrix weighting the square of non-controllable variables in the welfare function. There is no need to simulate impulse response functions over a long period, to compute period loss functions and to sum their discounted value over this long period, as currently done so far. Welfare is computed for the case of the new-Keynesian Phillips curve with an auto-regressive cost-push shock.
Subjects: 
Ramsey optimal policy
Welfare
Autoregressive shocks
new-Keynesian Phillips curve
JEL: 
C61
C62
C73
E47
E52
E61
E63
Document Type: 
Article
Document Version: 
Published Version

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