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Numerical solution of a control problem in economics

University of British Columbia

This thesis applies a numerical technique to a central bank control problem. The bank tries to control the inflation by influencing the nominal interest rates using the bank rates. The mathematical model is a two-dimensional singular control problem. The numerical method used is the Markov chain approximation method. We compute the optimal control and have some heuristic discussion on the convergence of the numerical method. Then we estimate the parameters in our model by the method of moments. We analyze the results from computing the control in the model with the estimated parameters and an economic interpretation is given.

Thesis/Dissertation

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2009-02-12

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http://hdl.handle.net/2429/4507

Mathematics

University of British Columbia

UBCV

DSpace