Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27736 
Year of Publication: 
2009
Series/Report no.: 
Economics Working Paper No. 2009-01
Publisher: 
Kiel University, Department of Economics, Kiel
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

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