tag:blogger.com,1999:blog-4159906646513306121.post3406593750714522304..comments2023-11-19T20:38:50.237-08:00Comments on Economic Logic: Optimal deviations from inflation targetingEconomic Logicianhttp://www.blogger.com/profile/10171296292101248614noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4159906646513306121.post-26652953149378887172013-03-14T09:18:33.351-07:002013-03-14T09:18:33.351-07:00Can an AK-style model really tell us anything sens...Can an AK-style model really tell us anything sensible about optimal policy? The model would feature increasing growth rates over time in the presence of population growth; is it really so surprising that the planner wants to induce extra labour supply in response to shocks? Even if you fix the strong scale effect through some knife-edge assumption, then you're left with a model in which standard business cycle shocks lead to large permanent changes in real output, whereas in reality US real GDP is near stationary.<br /><br />You have to work a lot harder to get an endogenous growth model to give sensible cyclical dynamics, and once you've done this the policy implications might be quite different. I've started to address these issues in <a href="http://www.tholden.org/working-papers" rel="nofollow">my own work</a>.Tom Holdenhttps://www.blogger.com/profile/12321127116935047622noreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-88433990893705930792013-03-14T08:33:12.612-07:002013-03-14T08:33:12.612-07:00This comment has been removed by the author.Tom Holdenhttps://www.blogger.com/profile/12321127116935047622noreply@blogger.com