Group for Research in Decision Analysis

Approximations to viability kernels for sustainable macroeconomic policies

Jacek B. Krawczyk Victoria University of Wellington, New Zealand

Maintaining an open economy within certain bounds on inflation, output gap and exchange rate can help sustainable economic development. Macroeconomics proposes monetary-policy models that describe evolution of the above quantities. We use one such model, constituted by a four-metastate one-control system, to compute viability kernel approximations that can one assist the Reserve Bank to establish “sustainable” policies using. We propose a simple heuristic algorithm that leads to kernel approximations for this and similar models.