Solution Algorithm to a Class of Monetary Rational Equilibrium Macromodels with Optimal Monetary Policy Design

摘要

In this paper an extended algorithm using well-known solution methods for monetary models characterized by rational expectations and optimal monetary policy design is given. The extension enables first the use of broad dynamic interde-pendencies within the structural model of the economy, second stochastic shocks on all endogenous variables and third commitment to a policy displaying no time inconsistency problem. All these points are not entirely new, but are seldom included into an operational solution algorithm. Furthermore a computational improvement concerning the splitting process for the stable and unstable part of the solution is proposed.