Abstract
In this paper we investigate optimal controls of an econometric model using the following ‘sliding window’ approach. The deterministic optimal control is computed but only the first period result implemented. Then we move to the next period (possibly with an updated forecast of the exogenous variables), and the procedure is successively repeated, each time with the horizon pushed one period further into the future. This sequential open-loop approach is similar to feedback control. Applied to a linear–quadratic economic model, it leads us to stochastic optimal control (by virtue of certainty equivalence) if exogenous variable updates are used; if not, ordinary deterministic optimal control may result. For practical purposes, it is valuable to know how important the distance to the horizon (i.e. the window width) is. Alternative distances are considered, using the CLEAR model, which is a 35-equation linear econometric model of Canada. The CONOPT optimization package is employed, allowing a piece-wise quadra...
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
