Acocella, Nicola and Di Bartolomeo, Giovanni (2007): Towards a new theory of economic policy: Continuity and innovation.

PDF
MPRA_paper_4419.pdf Download (231kB)  Preview 
Abstract
This paper outlines the evolution of the theory of economic policy from the classical contributions of Frisch, Hansen, Tinbergen and Theil to situations of strategic interaction. Andrew Hughes Hallett has taken an active and relevant part in this evolution, having contributed to both the development and recent rediscovery of the classical theory, with possible relevant applications for model building.
Item Type:  MPRA Paper 

Institution:  University of Teramo 
Original Title:  Towards a new theory of economic policy: Continuity and innovation 
Language:  English 
Keywords:  policy games; policy effectiveness; controllability; equilibrium existence 
Subjects:  A  General Economics and Teaching > A1  General Economics > A10  General E  Macroeconomics and Monetary Economics > E0  General > E00  General 
Item ID:  4419 
Depositing User:  Giovanni Di Bartolomeo 
Date Deposited:  11. Aug 2007 
Last Modified:  24. Apr 2015 16:53 
References:  Aarle, B. van, G. Di Bartolomeo, J. Engwerda, T. Michalak, J. Plasmans (2006), Dynamic modeling of monetary and fiscal cooperation among nations, Berlin: Springer. Acocella, N. and G. Ciccarone (1997), “Trade unions, nonneutrality and stagflation,” Public Choice, 91: 161178. Acocella, N. and G. Di Bartolomeo (2004), “Nonneutrality of monetary policy in policy games,” European Journal of Political Economy, 20: 695707. Acocella, N. and G. Di Bartolomeo (2005), “Controllability and nonneutrality of economic policy: The Tinbergen’s approach revised,” Working Paper No 81, Public Economics Department, University of Rome La Sapienza (http://w3.uniroma1.it/gdibartolomeo/). Acocella, N. and G. Di Bartolomeo (2006a), “Tinbergen and Theil meet Nash: Controllability in policy games,” Economics Letters, 90: 213218. Acocella, N. and G. Di Bartolomeo (2006b), Equilibrium existence and policy neutrality in static LQ games, mimeo. Acocella, N., G. Di Bartolomeo and A. Hughes Hallett (2006a), “Controllability in policy games: policy neutrality and the theory of economic policy revisited,” Computational Economics, 28: 91112. Acocella, N., G. Di Bartolomeo and A. Hughes Hallett (2006b), “Dynamic controllability with overlapping targets: Or why target independence may not be good for you,” Macroeconomic Dynamics, forthcoming. Albanesi, S., V.V. Chari, and L. Christiano (2003a), “How severe is the time inconsistency problem in monetary policy,” in Advances in economic theory and econometrics, edited by M. Dewatripont, L.P. Hansen and S. Turnovsky, Cambridge: Cambridge University Press. Albanesi, S., V.V. Chari, and L. Christiano (2003b), “Expectation traps and monetary policy,” The Review of Economic Studies: 70: 715741. Aoki, M. (1976), Optimal control and system theory in dynamic economic analysis, Amsterdam: North Holland. Athans, M. and P.L. Falb (1966), Optimal control, New York: McGraw Hill. Barro, R.J. (1974), “Are government bonds net wealth?,” Journal of Political Economy, 82: 10951117. Barro, R.J. and D. Gordon (1983), “Rules, discretion and reputation in a model of monetary policy,” Journal of Monetary Economics, 12: 101120. Başar, T. and G.J. Olsder (1995), Dynamic noncooperative game theory, second edition, London: Academic Press Limited. Bellman, R. (1957), Dynamic programming, Princeton: Princeton University Press. Bellman, R. (1961), Adaptive control processes: a guided tour, Princeton: Princeton University Press. Blanchard, O.J. and J. Galì (2005), “Real wage rigidities and the New Keynesian model,” MIT Department of Economics Working Paper No. 0528, FRB Boston Working Paper No. 0514, forthcoming in conference volume, Quantitative evidence on price determination, Journal of Money, Credit and Banking. Blanchard, O.J. and J. Galì (2006), “A New Keynesian model with unemployment,” MIT Department of Economics Working Paper No. 0528, FRB Boston Working Paper No. 06 22. Clarida, R., J. Galì, and M. Gertler (1999), “The science of monetary policy,” Journal of Economic Literature, 37: 16611707. Coricelli, F., A. Cukierman, and A. Dalmazzo (2006), “Monetary institutions, monopolistic competition, unionized labor markets and economic performance,” Scandinavian Journal of Economics, 108: 3963. Cukierman, A. (2004), “Monetary institutions, monetary union and unionized labor markets – Some recent developments,” in Monetary policy, fiscal policies and labour markets: Key aspects of macroeconomic policymaking in EMU, edited by Beetsma, R., C. Favero, A. Missale, V.A. Muscatelli, P. Natale, and P. Tirelli, Cambridge: Cambridge University Press. Cukierman, A. and F. Lippi (2001), “Labour markets and monetary union: a strategic analysis,” The Economic Journal, 111: 541561. Dasgupta, P. and E. Maskin, (1986), “The existence of the equilibrium in discontinuous economic games, I: Theory,” Review of Economic Studies, 53: 126. Dockner, E., S. Jorgensen, N. Van Long, and G. Sorger (2000), Differential games in economics and management sciences, Cambridge: Cambridge University Press. Engwerda, J.C. (2000a), “Feedback Nash equilibria in the scalar infinite horizon LQgame,” Automatica, 36: 135139. Engwerda, J.C. (2000b), “The solution set of the nplayer scalar feedback Nash algebraic Riccati equations,” IEEE Transactions on Automatic Control, 45: 23632369. Erceg, C.J., W.H. Dale, and A. Levin (2000), “Optimal monetary policy with staggered wage and price contracts,” Journal of Monetary Economics, 46: 281313. Friedman, M. (1968), “The role of monetary policy,” American Economic Review, 58: 117. Frisch, R. (1949), “A memorandum on pricewagetax subsidy policies as instruments in maintaining optimal employment,” UN Document E (CN1/Dub 2), New York, reprinted as Memorandum from Universitets Socialokonomiske Institutt, Oslo, 1953. Frisch, R. (1950), “L’emploi des modèles pour l'élaboration d'une politique économique rationnelle,” Revue d'Économie Politique, 60: 474498; 601634. Frisch, R. (1957), “Numerical determination of a quadratic preference function for use in macroeconomic programming,” Memorandum from the Institute of Economics at the University of Oslo, n. 14, reprinted in Studies in honour of Gustavo del Vecchio, Giornale degli Economisti e Annali di Economia, 1961, 1: 4383. Frisch, R. (1961), “A survey of types of economic forecasting and programming and a brief discussion of the Oslo channel model,” Memorandum from the Institute of Economics at the University of Oslo, 13 May. Gylfason, G. and A. Lindbeck (1986), “Endogenous unions and governments,” European Economic Review, 30: 526. Gylfason, G. and A. Lindbeck (1994), “The interaction of monetary policy and wages,” Public Choice, 79: 3346. Gnocchi, S. (2006), “Optimal simple monetary policy rules and nonatomistic wage setters in a NewKeynesian framework,” ECB Working Paper No 690. Hansen, B. (1958), The economic theory of fiscal policy, London: Allen & Unwin. Heal, G. (1973), The theory of economic planning, Amsterdam: North Holland. Holly, S. and A.J. Hughes Hallett (1989), Optimal control, expectations and uncertainty, Cambridge: Cambridge University Press. Hughes Hallett, A.J (1989), “Econometrics and the theory of economic policy: the Tinbergen Theil contributions 40 years on,” Oxford Economic Papers, 41: 189214. Hughes Hallett, A.J. and H. Rees (1983), Quantitative economic policies and interactive planning, Cambridge: Cambridge University Press. Ireland, P. (1999), “Does the timeconsistency problem explain the behavior of inflation in the United States?,” Journal of Monetary Economics, 44: 279291. Jerger, J. (2002), “Socially optimal monetary policy institutions,” European Journal of Political Economy, 18: 761781. Johansen, L. (1977), Lectures on macroeconomic planning, part I, Amsterdam: North Holland. Johansen, L. (1978), Lectures on macroeconomic planning, part II, Amsterdam: North Holland. Kalman, R.E. (1960), “Contributions to the theory of optimal control,” Boletin de la Sociedad Matematica Mexicana, 5: 10219. Kydland, F.E. and E.C. Prescott (1977), “Rules rather than discretion: the inconsistency of optimal plans,” Journal of Political Economy, 85: 473492. Leitemo, K. and U. Söderström (2004), “Robust monetary policy in the NewKeynesian framework,” CEPR Discussion Paper No. 4805, forthcoming, Macroeconomic Dynamics. Leontief, W. (1964), “Modern techniques for economic planning and projections,” in Essays in Economics, Theories and Theorizing, edited by Leontief W., Oxford: Blackwell, Vol. 1. Leontief, W. (1976), “National economic planning; methods and problems,” in The Economic System in an Age of Discontinuity, edited by Leontief W., New York: New York University Press. Lucas, R.E. (1976), “Econometric policy evaluation. A critique,” Journal of Monetary Economics, Supplement, CarnegieRochester Conference Series on Public Policy, 1: 19 46. Pappa, E. (2004), “Do the ECB and the Fed really need to cooperate? Optimal monetary policy in a twocountry world,” Journal of Monetary Economics, 51: 753779. Petit, M.L. (1990), Control theory and dynamic games in economic policy analysis, Cambridge: Cambridge University Press. Pindyck, R.S. (1973), “Optimal policies for economic stabilization,” Econometrica, 41: 529 60. Pontryagin, L.S., V. Boltyanskii, R., Gamkrelidze and E. Mishchenko (1962), The mathematical theory of optimal processes, New York: Interscience. Preston, A.J. and A.R. Pagan (1982), The theory of economic policy. Statics and dynamics, Cambridge: Cambridge University Press. Rogoff, K. (1985), “The optimal commitment to an intermediate monetary target,” Quarterly Journal of Economics, 100: 11691189. Sargent, T.J. (1987), Dynamic macroeconomic theory, Cambridge: Harvard University Press. Sargent, T.J. (2002), The conquest of the American inflation, Princeton: Princeton University Press. Sargent, T.J. and N. Wallace (1975), “Rational expectations, the optimal monetary instrument, and the optimal money supply rule,” Journal of Political Economy, 83: 241 254. Söderström, U. (2002), “Monetary policy with uncertain parameters,” Scandinavian Journal of Economics, 104: 125145. Soskice, D. and T. Iversen (2000), “The nonneutrality of monetary policy with large price or wage setters,” Quarterly Journal of Economics, 115: 265284. Stokey, N.L. (1990), “Reputation and time consistency,” American Economic Review, 79: 134139. Theil, H. (1954), “Econometric models and welfare maximization,” Weltwirtschaftliches Archiv, 72: 6083. Theil, H. (1956), “On the theory of economic policy,” American Economic Review, 46: 360 366. Theil, H. (1964), Optimal decision rules for government and industry, Amsterdam: North Holland. Tinbergen, J. (1936), Praeadviezen voor de Vereeniging voor de Staathuishoudkunde en de Statistiek, The Hague: Nijhoff, 62108. Tinbergen, J. (1939), “Statistical evidence on the acceleration principle,” Economica, 5: 164176. Tinbergen, J. (1952), On the theory of economic policy, Amsterdam: North Holland. Tinbergen, J. (1956), Economic policies. principles and design, Amsterdam: North Holland. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/4419 