Groupe d’études et de recherche en analyse des décisions

Approximations to viability kernels for sustainable macroeconomic policies

Jacek B. Krawczyk Victoria University of Wellington, Nouvelle-Zélande

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.