Journal Article

Machine Learning a Ramsey Plan

Abstract: We use a Python program to calculate a pair of infinite sequences of money creation and price level inflation rates that maximize a benevolent time 0 government’s quadratic objective function for a linear-quadratic version of Calvo (1978). The program computes an open-loop representation of the optimal plan and an associated monotonically declining, bounded from below sequence of continuation values whose limit is a worst continuation value that is associated with a “timeless perspective”. We run some least squares regressions on fake data to try to learn about the structure of the optimal plan but are stymied by not knowing which variables should be on the right and left sides of our regressions. We use literary arguments to decide this question, but they are inconclusive.

https://doi.org/10.21034/qr.4511

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Quarterly Review

Publication Date: 2025-05-12

Volume: 45

Issue: 1