Unconditionally Optimal Ramsey policy

Damjanovic, T.; Damjanovic, V.; Nolanz, C.

doi:10.1016/j.jmacro.2021.103346

Unconditionally Optimal Ramsey policy

Damjanovic, T.; Damjanovic, V.; Nolanz, C.

Authors

Professor Tatiana Damjanovic tatiana.damjanovic@durham.ac.uk
Professor

C. Nolanz

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 ëforward guidanceí, setting rules which are necessary and su¢ cient 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.

Citation

Damjanovic, T., Damjanovic, V., & Nolanz, C. (2021). Unconditionally Optimal Ramsey policy. Journal of Macroeconomics, 69, Article 103346. https://doi.org/10.1016/j.jmacro.2021.103346

Journal Article Type	Article
Acceptance Date	Jun 28, 2021
Online Publication Date	Jul 16, 2021
Publication Date	2021-09
Deposit Date	Jul 12, 2021
Publicly Available Date	Jul 16, 2022
Journal	Journal of Macroeconomics
Print ISSN	0164-0704
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	69
Article Number	103346
DOI	https://doi.org/10.1016/j.jmacro.2021.103346
Public URL	https://durham-repository.worktribe.com/output/1245734

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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2021 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/