Year: 2021
Type: report
Abstract: Since the contribution of Kydland and Prescott (1977), it is well known that the optimal Ramsey policy is time inconsistent. In a series of recent contributions, Woodford (2003) proposes a new methodology to circumvent this problem, namely the timeless perspective solution. However, one main limitation is that it is not yet empirically implementable. In this paper, we develop a new methodology to compute initial values of the Lagrange multipliers in order to implement the timeless-perspective solution. In so doing, we also provide a generalization of the Ramsey and timeless-perspective problems. We apply our results to a small-open economy model in Canada.
Source: Econstor (Econstor)
DOI: 10.34989/swp-2007-32
Authors: Juillard, Michel, Pelgrin, Florian
Institution: Paris School of Economics
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1575935622