Time-consistently undominated policies
| Autor: | Brendon, Charles, Ellison, Martin |
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| Jazyk: | angličtina |
| Rok vydání: | 2018 |
| Předmět: | |
| Zdroj: | Repositorio Digital de la UPF Universitat Pompeu Fabra Dipòsit Digital de Documents de la UAB Universitat Autònoma de Barcelona Recercat: Dipósit de la Recerca de Catalunya Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya) Recercat. Dipósit de la Recerca de Catalunya instname |
| Popis: | This paper proposes and characterises a new normative solution concept for Kydland and Prescott problems, allowing for a commitment device. A policy choice is dominated if either (a) an alternative exists that is superior to it in a time-consistent subdomain of the constraint set, or (b) an alternative exists that Pareto-dominates it over time. Policies may be time-consistently undominated where time-consistent optimality is not possible. We derive necessary and sufficient conditions for this to be true, and show that these are equivalent to a straightforward but significant change to the first-order conditions that apply under Ramsey policy. Time-consistently undominated policies are an order of magnitude simpler than Ramsey choice, whilst retaining normative appeal. This is illustrated across a range of examples. The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396. |
| Databáze: | OpenAIRE |
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