WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 10, 2013
An Application of Decentralized Control Theory to an Economic Policy Model
Author:
Abstract: We show an application of decentralized control theory to a macroeconomic model of unemployment and inflation. Fiscal and monetary policies are assumed to be designed by different institutions, namely the government and central bank respectively, and both policy-makers are assigned particular targets and may have different information. It is shown that the economic system can be stabilized by decentralized feedback. An interpretation in economic terms of the stabilizing controls and the conditions for stabilizability is given.