Optimal feedback stabilization policy with asymmetric loss functions

Optimal Monetary Stabilization Policy∗

Optimal Stabilization Policy with Endogenous Firm Entry

We study optimal monetary stabilization policy in a dynamic stochastic general equilibrium model where money is essential for trade and …rm entry is endogenous. We do so when all prices are ‡exible and also when some are sticky. Due to an externality a¤ecting …rm entry, the central bank deviates from the Friedman rule. Calibration exercises suggest that the nominal interest rate should have bee...

Optimal Stabilization Policy with Search Externalities

We study optimal monetary stabilization policy in a DSGE model with microfounded money demand. A search externality creates ‘congestion’ which causes aggregate output to be inefficient. Due to the informational frictions that give rise to money, households are unable to perfectly insure themselves against aggregate shocks. This gives rise to a welfare improving role for monetary policy that wor...

Optimal Monetary Policy with Asymmetric Targets

Abstract: We investigate the derivation of optimal interest rate rules in a simple stochastic framework. The monetary authority chooses to minimise an asymmetric loss function made up of the sum of squared components, where the monetary authority places positive weight on squared negative (positive) deviations of output (inflation) and zero weight on squared positive (negative) deviations. Rece...

Feedback Stabilization and Lyapunov Functions

Given a locally defined, nondifferentiable but Lipschitz Lyapunov function, we construct a (discontinuous) feedback law which stabilizes the underlying system to any given tolerance. A further result shows that suitable Lyapunov functions of this type exist under mild assumptions. We also establish a robustness property of the feedback relative to measurement error commensurate with the samplin...