Laurence H. Meyer

Optimal Coordination of Aggregate Stabilization Policy and Price Controls: A Sensitivity Analysis

Abstract This paper reports additional results obtained by applying optimal control techniques to a deterministic, discrete-time, nonlinear macrodynamic model that allows for the introduction of varying degrees of price control as well as traditional stabilization policy. We solve the model by numerical methods using a nongradient algorithm for direct optimization. We carry out a variety of simulations with alternative values of model parameters and with alternative specifications of the cost function to determine the sensitivity of the results previously reported to such changes and to determine the structure of the economy most conducive to effective use of price controls.