This paper models the action of the central bank on the dynamics of the nominal interest rate with the aim of controlling inflation. The problem is set up as a two-dimensional bounded variation control problem; it is shown that its variational formulation leads to a stochastic differential game with stopping times between the conservative and the expansionist tendencies of the bank.

Optimal Control of Inflation: a Central Bank Problem

Maria B. Chiarolla;
1998-01-01

Abstract

This paper models the action of the central bank on the dynamics of the nominal interest rate with the aim of controlling inflation. The problem is set up as a two-dimensional bounded variation control problem; it is shown that its variational formulation leads to a stochastic differential game with stopping times between the conservative and the expansionist tendencies of the bank.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11587/434208
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