Fiscal stimulus as an optimal control problem

STOCHASTIC PROCESSES AND THEIR APPLICATIONS

卷:150

Article

Ernst, Philip A.¹  Imerman, Michael B.²  Shepp, Larry³  Zhou, Quan⁴ 

[1] Rice Univ, Dept Stat, Houston, TX 77005 USA

[2] Claremont Grad Univ, Drucker Sch Management, Claremont, CA 91711 USA

[3] Univ Penn, Wharton Sch, Philadelphia, PA 19104 USA

[4] Texas A&M Univ, Dept Stat, College Stn, TX 77843 USA

关键词: Dividend problem;    Radner-Shepp model;    Fiscal stimulus;    Financial strategy;    Hamilton-Jacobi-Bellman equation;    Stochastic control;   

DOI  :  10.1016/j.spa.2021.05.009

来源: Elsevier

【 摘 要 】

During the Great Recession, Democrats in the United States argued that government spending could be utilized to grease the wheelsof the economy in order to create wealth and to increase employment; Republicans, on the other hand, contended that government spending is wasteful and discourages investment, thereby increasing unemployment. This past year we have found ourselves in the midst of another crisis where government spending and fiscal stimulus is again being considered as a solution. In the present paper, we address this question by formulating an optimal control problem generalizing the model of Radner and Shepp (1996). The model allows for the company to borrow continuously from the government. We prove that there exists an optimal strategy; rigorous verification proofs for its optimality are provided. We proceed to prove that government loans increase the expected value of a company. We also examine the consequences of different profit-taking behaviors among firms who receive fiscal stimulus. (c) 2021 Elsevier B.V. All rights reserved.

【 授权许可】

Free