Unconditionally optimal Ramsey policy

Damjanovic, T., Damjanovic, V. and Nolan, C. (2021) Unconditionally optimal Ramsey policy. Journal of Macroeconomics, 69, 103346. (doi: 10.1016/j.jmacro.2021.103346)

Abstract

We discuss a time invariant policy which delivers the unconditionally optimal outcomes in purely forward-looking models and Ramsey outcomes in purely backward-looking models. This policy is a product of interaction between two institutions with distinct responsibilities. Motivated by Brendon and Ellison (2015), we think of them as arms of government. One institution is responsible for ‘forward guidance’, setting rules which are necessary and sufficient to determine private expectations. The second institution implements optimal policy taking expectations as given. The forward guidance rules are designed to maximise the unconditional expectation of the social objectives.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Nolan, Professor Charles and Damjanovic, Professor Tatiana and Damjanovic, Dr Vladislav
• Authors: Damjanovic, T., Damjanovic, V., and Nolan, C.
• College/School: College of Social Sciences > Adam Smith Business School; College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Macroeconomics
• Publisher: Elsevier
• ISSN: 0164-0704
• ISSN (Online): 1873-152X
• Published Online: 16 July 2021
• Copyright Holders: Copyright © 2021 Elsevier Inc
• First Published: First published in Journal of Macroeconomics 69:103346
• Publisher Policy: Reproduced in accordance with the publisher copyright policy