Anticipations and Time-Varying Modeling in Adaptive Control System

Abstract

There is a large volume of literatures on the effectiveness of monetary and fiscal policies and on lags in the effects of monetary policies (Friedman & Schwartz, 1963; Meyer, 1967; Tobin, 1970; Hamburger, 1971). Although lengths of lags are important in determining the role of monetary-fiscal policies, the relationship between money and income varies over time due to changes in the lag structure. Mountford and Uhlig (2008), Gali (2007), Perotti (2005), Poole (1975), Warburton (1971) and Meyer (1967) attempted to analyse the empirical variability of the lag structure by analysing the turning points in general business activity. Ljungqvist and Sargent (2004), Sargent and Wallace (1973) and Lucas (1972) have drawn attention to the role of time-dependant response coefficients to changes in stabilization policies and the role anticipation plays in the conduct of monetary-fiscal policy.