Solving for Optimal Simple Rules in Rational-Expectations Models


Richard Dennis

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2000-14 | December 1, 2000

This paper presents techniques to solve for optimal simple monetary policy rules in rational expectations models, assuming discretion. The techniques described are notable for the flexibility they provide over the structure of the policy rule being solved for. Specifically, not all state variables need enter the policy rule allowing rules optimal conditional on a given information set to be easily constructed. The algorithms described are compared to related solution methods, and applied to the model in Clarida, Gali, and Gertler (1999).

Article Citation

Dennis, Richard. 2000. “Solving for Optimal Simple Rules in Rational-Expectations Models,” Federal Reserve Bank of San Francisco Working Paper 2000-14. Available at