Optimal control indicators for the assessment of theinfluence of government policy to business cycle shocks

John Leventides; Iraklis Kollias

doi:10.3934/jdg.2014.1.79

Article Contents

2014, Volume 1, Issue 1: 79-104. Doi: 10.3934/jdg.2014.1.79

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Optimal control indicators for the assessment of the influence of government policy to business cycle shocks

John Leventides^1, and
Iraklis Kollias^1,

1.
Department of Economics, Division of Mathematics-Informatics, National and Kapodistrian University of Athens, 8 Pesmazoglou Street, Athens, 105 59

Received: July 2012

Revised: October 2012

Published: January 2014

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Abstract

We consider idealised dynamic models isolating the relationship between GDP and government expenditures. In this setting we assess the possibility of smoothing the effect of business cycle shocks via government expenditure alone and propose optimal control indicators measuring the control potential of this government action. This provides with new indicators and indices refining the dynamic relationship obtained by ARMA or similar type of macro - modeling.

Keywords:

Control systems,
stochastic optimal control,
business cycles,
dynamic macro - modeling and indicators.

Mathematics Subject Classification: Primary: 93C05, 93E20; Secondary: 49J21.

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