A Control Theory Approach to Analysis of Economic Policy for a Developing Country

A Control Theory Approach to Analysis of Economic Policy for a Developing Country Synopsis

Control Theory is applied to the economy of a developing country to determine the best ways to achieve a set of economic policy objectives as indexed by a criterion function when the performance is judged over many years and when the dynamic behaviour of the system is subject to a set of constraints. Economic policy instruments are constrained and boundary conditions imposed to ensure that the solution path is reasonable. Control Theory does not only provide normative prescriptions to economic policy issues, but also serves as an important supplementary tool in the realm of economic forecasting. A priori knowledge of the various political, bureaucratic and administrative influences could provide the policy adviser with a vivid picture of the pressures that could muddy the waters for policy-makers in developing countries and which could shape priorities of economic policy.