Accession Number:

AD0729403

Title:

Optimal Stabilization Policies,

Descriptive Note:

Corporate Author:

BROWN UNIV PROVIDENCE R I DIV OF APPLIED MATHEMATICS

Personal Author(s):

Report Date:

1971-08-01

Pagination or Media Count:

51.0

Abstract:

The approach to economic stabilization policy is indirect, but yields clear cut conclusions for stabilization policy given an equilibrium unemployment rate and the related rate of price change, based upon a steady state relation between these state variables. Define this point as the origin and vector x measures the deviation of the economy from the desired steady state. The authors formulate a third order dynamic model of the economy in which x is the state. The purpose of the controls is to drive, in some appropriate manner, these three variables to the origin. The authors approach is to insist upon stability and also impose constraints on possible excursions of the transients x. This is done by assigning a cost or penalty function Vx to a state which is not the desired one, and by insisting that the controls be such that the economy follow a path along which this cost is monotonically decreasing. The authors can bring Vx monotonically to zero only when some weight is given to each component of x. The authors then present control laws which will reduce this cost monotonically to zero. Author

Subject Categories:

  • Economics and Cost Analysis
  • Operations Research

Distribution Statement:

APPROVED FOR PUBLIC RELEASE