Optimal Control of Large, Forward-Looking Models: Efficient Solutions and Two Examples

Frederico Finan, Robert J. Tetlow
2000 Social Science Research Network  
An optimal control tool is described that is particularly useful for computing rules of large-scale models where users might otherwise have difficulty determining the state vector a priori and where the inversion of large, sparse matrices can make working with matrix Ricatti equations numerically costly or infeasible. A small-scale demonstration is presented, as are data on performance with the Board of Governors' large-scale rational expectations macroeconometric model, FRB/US.
doi:10.2139/ssrn.203393 fatcat:qpgftw722bglbmejolpckr6gye