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Dynamic Optimization in Two-Party Models

Warwick J. McKibbin; Nouriel Roubini; Jeffrey D. Sachs

Title:
Dynamic Optimization in Two-Party Models
Author(s):
McKibbin, Warwick J.; Roubini, Nouriel; Sachs, Jeffrey D.
Date:
Type:
Working papers
Department:
Earth Institute
Permanent URL:
Part Number:
2213
Abstract:
The goal of this paper is to study the problem of optimal dynamic policy formulation with competing political parties. We study a general class of problems, in which the two competing political parties have quadratic intertemporal objective functions, and in which the economy has a linear structure and a multidimensional state space. For the general linear quadratic problem we develop a numerical dynamic programming algorithm to solve for optimal policies of each party taking into account the party's objectives; the structure of the economy; the probability of future election results; and the objectives of the other political party.
Subject(s):
Political science, Economic theory
Item views:
140
Metadata:
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