ABSTRACT
In Chapters 6 to 9 we studied empirically the workings of various policy rules on the economy. The following chapter describes, in technical detail, how policy rules, such as those used in this book, can be tested and implemented in an empirical non-linear model. In our work on policy design we have attempted to place rather less emphasis on ‘optimality’ than is usual. We presented reasons for this in Chapter 1 and discuss the issue further in Chapter 11. On the other hand, we have placed a great deal of stress on stability, because we would not want to recommend policies which appeared to be unstable in the long run, however desirable their properties might appear to be over some finite horizon. 1
