Optimal Economic Stabilization Policy: An Extended Framework

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Optimal Economic Stabilization Policy: An Extended Framework

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Title: Optimal Economic Stabilization Policy: An Extended Framework
Author: Friedman, Benjamin Morton
Citation: Friedman, Benjamin Morton. 1972. Optimal economic stabilization policy: An extended framework. Journal of Political Economy 80(5): 1002-1022.
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Abstract: This paper outlines an optimization framework which extends the familiar Tinbergen-Theil model in two ways. First, a "piecewise quadratic" replaces the standard quadratic objective function. Second, the time horizon of the optimization becomes, within the context of economic stabilization problems, endogenous to the optimization process itself. The purpose of both extensions is to escape the conceptual restrictiveness of the Tinbergen-Theil structure while preserving the practical convenience of that model for applied policy work. The paper also describes a solution algorithm incorporating these two extensions, and it presents the results of a sample computational application based on the 1957-58 recession.
Published Version: doi:10.1086/259947
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4554308
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