Optimal policy with general signal extraction

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• dc.contributor.author Hauk, Esther
• dc.contributor.author Lanteri, Andrea
• dc.contributor.author Marcet, Albert
• dc.date.accessioned 2021-03-26T09:59:22Z
• dc.date.issued 2021
• dc.description.abstract Most available results on optimal decisions under partial information are derived under “separation”. But this principle does not always hold. We derive a non-standard first order condition of optimality from first principles when signal extraction and optimal policy must be jointly determined. This allows us to solve a model of optimal fiscal policy where separation does not apply. Tax smoothing prevails in normal times, but taxes respond strongly in recessions. This non-linearity arises because signal extraction interacts differently with optimal policy depending on the value of the observed signals. Existing results based on the “separation principle” follow as special cases.en
• dc.description.sponsorship Hauk acknowledges financial support from through CICYT project number ECO2015-67171-P (MINECO / FEDER) and from the Spanish Ministry of Science, Innovation and Universities through project PGC2018-097898-B-100 MCIU/AEI/FEDER. Hauk and Marcet have received funding from the European Community’s Seventh Framework Programme (FP7/2007-2013) under grant agreement no. 612796, from the government of Catalonia (2017 SGR 1571) and from the Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Program for Centers of Excellence in R&D (CEX2019-000915-S). Lanteri acknowledges support and hospitality from MOVE Barcelona and Institut d’Anàlisi Econòmica-CSIC. Marcet acknowledges support from the Axa Foundation; the Excellence Program of Banco de España; and the European Research Council (ERC) under the European Unions Seventh Framework Programme FP7/2007-2013 GA number 324048-(APMPAL) and Horizon2020 GA number 788547 (APMPAL-HET)
• dc.format.mimetype application/pdf
• dc.identifier.citation Hauk E, Lanteri A, Marcet A. Optimal policy with general signal extraction. J Monet Econ. 2021 March;118:54-86. DOI: 10.1016/j.jmoneco.2021.01.002
• dc.identifier.doi http://dx.doi.org/10.1016/j.jmoneco.2021.01.002
• dc.identifier.issn 0304-3932
• dc.identifier.uri http://hdl.handle.net/10230/46963
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of Monetary Economics. 2021 March;118:54-86
• dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/612796
• dc.relation.projectID Journal of Monetary Economics. 2021 March;118:54-86.
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/PGC2018-097898-B-100
• dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/324048
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/788547
• dc.rights © Elsevier http://dx.doi.org/10.1016/j.jmoneco.2021.01.002
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Optimal policyen
• dc.subject.keyword Partial informationen
• dc.subject.keyword Calculus of variationsen
• dc.subject.keyword Fiscal policyen
• dc.title Optimal policy with general signal extractionen
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion