Optimal monetary policy in an open macroeconomic model with rational expectation

dc.contributor.advisor Stanley Johnson
dc.contributor.advisor Walter Enders
dc.contributor.author Hwang, Chiun-Lin
dc.contributor.department Economics
dc.date 2018-08-17T14:03:30.000
dc.date.accessioned 2020-07-02T06:11:54Z
dc.date.available 2020-07-02T06:11:54Z
dc.date.copyright Sun Jan 01 00:00:00 UTC 1989
dc.date.issued 1989
dc.description.abstract <p>This study is concerned with the choice of the optimal control of money supply for a linear stochastic discrete-time model of an open economy with rational expectations. Optimal control theory is applied to the setting of the stabilization policy. The linear and quadratic loss function is assumed to be the government objective function form. 'Optimal' indicates that the expected weighted sum of the squares of deviations of the state variables from the target values (or trend values) is minimized. The objectives of the study are (1) to examine the validity of the 'policy ineffectiveness proposition', (2) to investigate the comparative performances of alternative money supply rules--feedback versus fixed and superior information versus fixed, and (3) to determine whether the structure of the economy is crucial to the effectiveness of the setting of the money supply rule, in the sense that the economy is insulated from random shocks;It is shown that the derived optimal money supply has an effect on the probability distribution of output, price, and other endogenous variables even when public expectations are rational. The variance of endogenous variables will change as alternative money supply rules are applied. It indicates that either the feedback money supply rule or the superior information rule is effective in an economy with rational expectations. The structure of the economy does really matter when choosing the optimal money supply rule of stabilization policy.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/rtd/9198/
dc.identifier.articleid 10197
dc.identifier.contextkey 6355625
dc.identifier.doi https://doi.org/10.31274/rtd-180813-9043
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath rtd/9198
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/82270
dc.language.iso en
dc.source.bitstream archive/lib.dr.iastate.edu/rtd/9198/r_8920143.pdf|||Sat Jan 15 02:29:24 UTC 2022
dc.subject.disciplines Economics
dc.subject.keywords Economics
dc.title Optimal monetary policy in an open macroeconomic model with rational expectation
dc.type article
dc.type.genre dissertation
dspace.entity.type Publication
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
thesis.degree.level dissertation
thesis.degree.name Doctor of Philosophy
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