Abstract
In this paper I will survey the development of stochastic control theory in macroeconomic policy analysis. The development can conveniently be separated into three periods. The first is pre-1970 when the major ideas of policy analysis and of optimization were formed. The second is the early and middle 1970s when formal stochastic control theory was rapidly developed for and applied to the study of macroeconomic policy. The third period, beginning in the late 1970s, was stimulated by the introduction of the idea of rational expectations in economic analysis. This introduction has a significant impact on the way stochastic control theory is applied to studying the effects of given macroeconomic policy rules. The main ideas in the three periods will be set forth in turn.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bellman, Richard (1953): An Introduction to the Theory of Dynamic Programming. Santa Monica: The Rand Corporation.
Blanchard, Olivier J. (1983): “The Production and Inventory Behavior of the American Automobile Industry,” Journal of Political Economy, 91.
Blinder, Alan S. (1983): “Skeptical Note on the New Econometrics.” Cambridge: National Bureau of Economic Research, Working Paper No. 1092.
Chow, Gregory C. (1970): “Optimal Stochastic Control of Linear Economic Systems,” Journal of Money, Credit and Banking, 2, 291–302.
Chow, Gregory, C. (1972a): “Optimal Control of Linear Econometric Systems with Finite Time Horizon,” International Economic Review 13 (1), 16–25.
Chow, Gregory C. (1972b): “How much could be Gained by Optimal Stochastic Control Policies?” Annals of Economic and Social Measurement, 1 (4), 391–406.
Chow, Gregory C. (1975): Analysis and Control of Dynamic Economic Systems. New York: John Wiley & Sons, Inc.
Chow, Gregory, C. (1980: “Estimation of Rational Expectation Models,” Journal of Economic Dynamics and Control, 2, 241–256.
Chow, Gregory C. (1981): Econometric Analysis by Control Methods. New York: John Wiley & Sons, Inc.
Chow, Gregory C. (1983): Econometrics. New York: McGraw-Hill Book Company.
Committee on Policy Optimisation, R. J. Ball, Chairman (1978): Report. London: Her Majesty’s Stationery Office.
Friedman, Benjamin M. (1973): Methods in Optimization for Economic Stabilization Policy. Amsterdam: North-Holland Publishing Company.
Hansen, Lars P. and Thomas J. Sargent (1980): “Formulating and Estimating Dynamic Linear Rational Expectations Models,” Journal of Economic Dynamics and Control, 2, 7–46.
Holly, Sean, Berc, Rüstern and Martin B. Zarrop, eds. (1979): Optimal Control for Econometric Models: An Approach to Economic Policy Formulation. London: The Macmillan Press Ltd.
Holt, Charles C., Franco Modigliani, John F. Muth, and Herbert A. Simon (1963): Planning Production, Inventories and Work Force. Englewood Cliffs: Prentice-Hall.
Kalman, R. E. (1960): “A New Approach to Linear Filtering and Prediction Problems,” Journal of Basic Engineering Trans., ASME, 82D, 33–45.
Kendrick, David (1981): Stochastic Control for Economic Models. New York: McGraw-Hill Book Company.
Lucas, Robert E., Jr. (1976): “Econometric Policy Evaluation: A Critique,” in K. Brunner and A. H. Meltzer (eds.), The Phillips Curve and Labor Markets. Carnegie-Rochester Conference Series on Public Policy, Vol. 1. Amsterdam: North-Holland Publishing Company.
MacRae, R. C. (1972): “Linear Decision with Experimentation.” Annals of Economic and Social Measurement, 1, 437–448.
Marschak, J. (1953): “Economic Measurements for Policy and Prediction,” in W. C. Hood and T. C. Koopmans (eds.). Studies in Econometric Method, Cowles Commission Monograph 14. New York: John Wiley & Sons, Inc.
Miller, M. and M. Salmon (1984): “Dynamic Games and Time Consistent Policy in Open Economics.” Mimeo.
Muth, J. F. (1961): “Rational Expectations and the Theory of Price Movements,” Econometrica, 29, 315–335.
Norman, A. L. (1984): “Alternative Algorithms for the MacRae OLCV Strategy,” Journal of Economic Dynamics and Control 7, 21–38.
Phillips, A. W. (1958): “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957,” Economica, 25, 283–299.
Pindyck, Robert S. (1973): Optimal Planning for Economic Stabilization. Amsterdam: North-Holland Publishing Company.
Sargent, T. J. (1979): Macroeconomic Theory. New York: Academic Press.
Simon, H. A. (1956): “Dynamic Programming Under Uncertainty with a Quadratic Criterion Function,” Econometrica, 24 (1), 74–81.
Theil, H. (1958): Economic Forecasts and Policy. Amsterdam: North-Holland Publishing Company.
Tinbergen, Jan (1952): On the Theory of Economic Policy. Amsterdam: North-Holland Publishing Company.
Tinbergen, Jan (1956): Economic Policy: Principles and Design. Amsterdam: North-Holland Publishing Company.
Tinbergen, Jan (1969): “The Use of Models: Experience and Prospects,” Noble Prize Lecture delivered in Stockholm, December 1969; American Economic Review, 71 (6), 17–22.
Tse, Edison (1974): “Adaptive Dual Control Methods,” Annals of Economic and Social Measurement, 3, 65–68.
Wan, Henry Y., Jr. (1983): “The New Classical Economics — A Game-Theoretic Critique.” Mimeo. Forthcoming in George Feiwel (ed.), Issues in Macroeconomics and Distribution. New York: The Macmillan Co.
Whittle, P. (1963): Prediction and Regulation by Linear Least Square Methods. New York: D. Van Nostrand Co.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1987 Martinus Nijhoff Publishers, Dordrecht
About this chapter
Cite this chapter
Chow, G.C. (1987). Development of Control Theory in Macroeconomics. In: Carraro, C., Sartore, D. (eds) Developments of Control Theory for Economic Analysis. Advanced Studies in Theoretical and Applied Econometrics, vol 7. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-3495-5_1
Download citation
DOI: https://doi.org/10.1007/978-94-009-3495-5_1
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-8063-7
Online ISBN: 978-94-009-3495-5
eBook Packages: Springer Book Archive