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Title:Optimal Stabilization Policy in a Fixprice-Flexprice Model
Author(s):Cheung, Chun-Sang
Department / Program:Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Economics, Finance
Abstract:Much of the theoretical work done in the area of wage and price controls suggests that controls are an effective means for reducing inflation. However, in these same studies too little attention has been paid to the shortages created by the controls. In part this oversight is due to the implicit assumption of markup pricing behavior, which ignores the determination of output. As a result, the potential for misallocation in these studies is severely restricted. Once the importance of supply and demand in price determination is recognized, shortages can easily be induced by the artificial low prices of controls. If in addition, speculations are an important factor, the potential for misallocation increases significantly.
In order to analyze this potential, a four sector model is developed. The key sector is a commodity (crude materials, etc.) market which incorporates speculative behavior. Furthermore, this model allows for both price and employment feedback effects of commodity speculations. Optimal control theory is applied to this model to analyze various policy mixes (both wage and price controls and demand management policies) and the misallocation potential.
Issue Date:1981
Description:141 p.
Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1981.
Other Identifier(s):(UMI)AAI8203426
Date Available in IDEALS:2014-12-14
Date Deposited:1981

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