The Making of Optimal and Consistent Policy: An Analytical Framework for Monetary Models

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the central bank should adopt a loss function that differs from the social loss function. Carefully designing the central bank s loss function with consistent targets can harmonize optimal and consistent policy. This desirable result emerges from two observations. First, the social loss function reflects a normative process that does not necessarily prove consistent with the structure of the microeconomy. Thus, the social loss function cannot serve as a direct loss function for the central bank. Second, an optimal loss function for the central bank must depend on the structure of that microeconomy. In addition, this paper shows that control theory provides a benchmark for institution design in a game-theoretical framework.

The Making of Optimal and Consistent Policy: An Implementation Theory Framework for Monetary Policy

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the social loss function cannot serve as a direct loss function for the central bank. Accordingly, we employ implementation theory to design a central bank loss function (mechanism design) with consistent targets, while the social loss function serves as a social welfare criterion. That is, with the correct mechanism design for the central bank loss function, optimal policy and consistent policy become identical. In other words, optimal policy proves implementable (consistent).

Relationship of Turfgrass Growth and Quality to Soil Nitrate Desorbed from Anion Exchange Membranes

Anion exchange membranes (AEMs) are a potential method for determining the plant available N status of soils; however, their capacity for use with turfgrass has not been researched extensively. The main objective of this experiment was to determine the relationship between soil nitrate desorbed from AEMs and growth response and quality of turfgrass managed as a residential lawn. Two field experiments were conducted with a bluegrass-ryegrass-fescue mixture receiving four rates of N fertilizer (0, 98, 196, and 392 kg N ha(-1) yr(-1)) with clippings returned or removed. The soils at the two sites were a Paxton fine sandy loam (coarse-loamy, mixed, active, mesic Oxyaquic Dystrudepts) and a variant of a Hinckley gravelly sandy loam (sandy-skeletal, mixed, mesic Typic Udorthents). Anion exchange membranes were inserted into plots and exchanged weekly during the growing seasons of 1998 and 1999. Nitrate-N was desorbed from AEMs and quantified. As N fertilization rates increased, desorbed NO3-N increased. The relationship of desorbed NO3-N from AEMs to clipping yield and turfgrass quality was characterized using quadratic response plateau (QRP) and Cate-Nelson models (C-Ns). Critical levels of desorbed NO3-N ranged from 0.86 to 8.0 microgram cm(-2) d(-1) for relative dry matter yield (DMY) and from 2.3 to 12 microgram cm(-2) d(-1) for turfgrass quality depending upon experimental treatment. Anion exchange membranes show promise of indicating the critical levels of soil NO3-N desorbed from AEMs necessary to achieve maximum turfgrass quality and yield without overapplication of N.