Do Chemical Reactors Hold the Solution for Global Economic Crises?

What can economists learn from dynamic partial control of chemical reactors? Both chemical reactors and the economy involve many variables that are difficult to fully predict or control. Thus, this paper suggests the use of partial control, which involves indentifying only the key variables that monitor the system. This idea of observing relatively few variables and enabling policy makers to better control the economy is in line with the contributions of Sargent and Sims, who use a limited number of variables to study monetary and fiscal policies. This approach enables a better distinction between cause and effect in the macroeconomy.

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Paper Number
12-010
Year
2012