Control Exercises with a Small Linear Model of the UK Economy
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The use of the methods of optimal control in the formulation of economic policies has been demonstrated in Bray (1975) and Wall and Westcott (1975), as well as in countless other papers. The results reported here are in the same vein as the Bray and Wall and Westcott papers with a linear model, a quadratic objective function and gaussian stochastic disturbances. Rather, however, than go over ground that has already been covered we will focus in this paper on some less central aspects of the control framework. This will provide a complementary study to some more recent work reported in Rustem et al. and Zarrop et al. (Chapters 6 and 10 of this volume).
KeywordsExchange Rate Econometric Model Import Price Unit Labour Cost Indirect Taxis
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