Stochastic policy design in a learning environment with rational expectations

H.M. Amman, D.A. Kendrick

Research output: Contribution to journalArticleAcademicpeer-review

9 Citations (Scopus)

Abstract

In this paper, we present a method for using rational expectations in a stochastic linear-quadratic optimization framework in which the unknown parameters are updated through a learning scheme. We use the QZ decomposition as suggested by Sims (Ref. 1) to solve the rational expectations part of the model. The parameter updating is done with the Kalman filter and the optimal control is calculated using the covariance matrix of the uncertain parameter.
Original languageEnglish
Pages (from-to)509-520
Number of pages12
JournalJournal of Optimization Theory and Applications
Volume105
Issue number3
DOIs
Publication statusPublished - 2000
Externally publishedYes

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