The Role of Feedback in Macroeconomic Policy

  • D. A. Livesey


Whilst economists have been exploring the application of optimal control theory to macroeconomic policy formulation some engineers have been re-examining classical feedback theory. Recently the feedback literature has been extended to cover multivariable systems in a way which gives insight into questions of stability and control. In this paper some of the features of this feedback approach most relevant to economic applications are demonstrated using two different macroeconomic models. We begin with a version of Bill Phillips’ model which he used in his famous article (Phillips (1954)), to illustrate the application of control theory to economies. Then we turn to Wassily Leontief’s dynamic input-output model which is a large linear model used for planning purposes in many countries. Finally we examine how the feedback techniques could be used to analyse a nonlinear model.


Econometric Model Saving Rate Feedback Gain Optimal Control Theory Final Demand 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aoki, M. (1973), ‘On Sufficient Conditions for Optimal Stabilization Policies’, Rev. Econ. Stud. vol. 40, pp. 131–8CrossRefGoogle Scholar
  2. Barker, T. S. (1971), ‘A Maximum Sustainable Growth Rate for British Industrial Outputs’, Rev. Econ. Studies, vol. 38, pp. 369–76.CrossRefGoogle Scholar
  3. Livesey, D. A. (1976), ‘A Minimal Realization of the Leontief Dynamic Input-Output Model’, in Polenske, K., and Skolka, J. Advances in Input-Output Analysis (Ballinger Books, Mass.) pp. 527–41.Google Scholar
  4. MacFarlane, A. C. J. (1975), ‘Relationships between Recent Developments in Linear Control Theory and Classical Design Techniques, Measurement and Control, vol. 8, pp. 179–87, 219–23, 278–84, 319–24 and 371–5.Google Scholar
  5. Phillips, A. W. (1954), ‘Stabilisation Policy in a Closed Economy’, Econ. J., vol. 64, pp. 290–323.CrossRefGoogle Scholar
  6. Cambridge University Department of Applied Economics (1970), ‘Exploring 1972 with Special Reference to the Balance of Payments’, no. 9 in A Programme for Growth (Chapman & Hall, London).Google Scholar

Copyright information

© D. A. Livesey 1979

Authors and Affiliations

  • D. A. Livesey

There are no affiliations available

Personalised recommendations