Partial Adjustment As Optimal Response in a Dynamic Brainard Model

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Preprint 01 Jan 2003 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Richard Startz;

doi: 10.2139/ssrn.449660

Partial Adjustment As Optimal Response in a Dynamic Brainard Model

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Abstract

Uncertainty about the precise quantitative effect of policy is endemic in economics. In a classic paper, Brainard showed that in the face of multiplier uncertainty in a static model that optimal policy is relatively conservative. I extend this work to a dynamic model and in the most simple case derive the classic partial adjustment model as the optimal response to shocks.

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University of California, Santa Barbara
United States

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