Title: Let's MPC the economy: stabilising the economy using more dynamic regulation

Authors: Yucai Zhu

Addresses: Control Systems Group, Faculty of Electrical Engineering, Eindhoven University of Technology, P.O. Box 513, 5600 MB Eindhoven, The Netherlands; Tai-Ji Control BV, Grensheuvel 10, 5685 AG Best, The Netherlands

Abstract: This work proposes a method for stabilising a nation|s macro economy. The idea is to use more dynamic regulation. At present, only the Central Bank|s short-run interest rate is used as a dynamic variable in the government monetary policy for stabilising the macro economy. The author suggests to make the value added tax (VAT) as a new dynamic regulation variable. The VAT can be adjusted monthly or quarterly coordinated with the Central Bank|s interest rate by a new independent agency called Central Tax Bureau (or by the Central Bank). The advantages of the method will be discussed; the implementation of the method will be outlined. Control theoretical analysis and computer simulation will be used to demonstrate the effectiveness of the method.

Keywords: macroeconomics; dynamic systems; dynamic regulation; optimisation; monetary policy; economic stabilisation; value added tax; VAT; interest rates; control theory; simulation.

DOI: 10.1504/IJMIC.2011.042650

International Journal of Modelling, Identification and Control, 2011 Vol.14 No.3, pp.141 - 148

Available online: 23 Sep 2011 *

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