Feedback and the Use of Current Information: The Use of General Linear Policy Rules in Rational Expectations Models / Willem H. Buiter.

By:

Buiter, Willem H

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0335.Publication details: Cambridge, Mass. National Bureau of Economic Research 1979.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: The behavior of several stochastic dynamic rational expectations models is studied when policy behavior can be described by a linear rule. Four policy components are distinguished: a current response component, a feedback component, an open-loop component and a stochastic component. Policy is evaluated in terms of the current and asymptotic first and second moments of the state variables. The importance of distinguishing between variability and uncertainty is brought out. The conditional variance is argued to be the appropriate measure of uncertainty. The analysis is applied to a model of foreign exchange market intervention.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0335 (Browse shelf(Opens below))	Not For Loan

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April 1979.

The behavior of several stochastic dynamic rational expectations models is studied when policy behavior can be described by a linear rule. Four policy components are distinguished: a current response component, a feedback component, an open-loop component and a stochastic component. Policy is evaluated in terms of the current and asymptotic first and second moments of the state variables. The importance of distinguishing between variability and uncertainty is brought out. The conditional variance is argued to be the appropriate measure of uncertainty. The analysis is applied to a model of foreign exchange market intervention.