Design limits and dynamic policy analysis

Abstract

This paper characterizes the frequency domain properties of feedback control rules in linear systems in order to better understand how different policies affect outcomes frequency by frequency. We are especially concerned in understanding how reductions of variance at some frequencies induce increases in variance at others. Tradeoffs of this type are known in the control literature as design limits. Design limits are important in understanding the full range of effects of macroeconomic stabilization policies. We extend existing results to account for discrete time bivariate systems with rational expectations. Application is made to the evaluation of monetary policy rules.

Allowing variance may enlarge the safe operating space for exploited ecosystems

“…The mechanism has been suggested as a cause of fragility in regulatory networks for ecosystem services (38). It has also been used in economics to understand how policy choices to decrease short-term variance create long-term variance (22,39).…”

Measurement error and policy evaluation in the frequency domain

“…To work out this extension, I need to cope with the transfer matrix and spectral density matrix instead of the scalar sensitivity function and spectral density function. Design limits will still show up but in the matrix form [Brock et al (2008b)]. Thus, some new techniques may be required.…”

“…These tradeoffs are known as design limits. They were first identified by Bode (1945) in the engineering literature of linear system control and were introduced into the study of feedback policy rules in macroeconomics by Durlauf (2004, 2005) with extension to the vector case with forward-looking elements developed by Brock et al (2008b). These design limits are sufficiently complicated in the time domain as to render use impractical outside of the frequency domain.…”

The specificity and typology of dynamic management studies

“…The prospective approach, which is characterized by the fact that, starting from a thorough analysis of managerial realities in certain areas, it anticipates managerial developments over the short, medium or long term (Nohria and Berkley, 1994;Taxén, 1999;Fowler, 2003;Devitt, 2004;Johnson, 2004;Heller, 2006;Brock et al, 2008;Reeder and Gragg, 2008;Munteanu and Grosu, 2011;Cairncross, 2002;McAfee and Brynjolfsson, 2012).…”

“…. The processual dynamic approach, which focuses on the evolution of important managerial processes in organizations (Katzenbach, 2000;de Neufville, 2000;Heller, 2006;Agbor, 2008;Brock et al, 2008;Cummings and Worley, 2008;Doz and Kosonen, 2008;Schreyoogg and Kliesch-Eberl, 2007;Kolb and Kolb, 2009;Mostovicz et al, 2009;Kozlovski et al, 2009;Nassif et al, 2010;Nicolescu and Nicolescu, 2010;Bold, 2011;Phondej et al, 2011;Rivoli and Waddock, 2011;Farhoomand, 2012). Specific to this approach is the analysis of characteristics' dynamics within the main categories of processes and management activities in the organization.…”