Modeling and control of the Slovenian economy

Shows how the application of optimum control theory in economics can be used to obtain insights into preferences of and hence to give policy advice for decision-makers in the Slovenian government. For this purpose, by applying the optimum control algorithm OPTCON, optimal monetary and fiscal policies for Slovenia are determined under the constraints given by SLOPOL, a macro-econometric model of the Slovenian economy. In a first step, an objective function is optimized with variables that might be of interest to Slovenian policymakers. Next, the sensitivity of the optimal policies is analyzed with respect to variations in the parameters of the objective function. Furthermore, the effects of the exchange rate system on optimal policies are analyzed. Finally, the question is addressed as to whether a cut in labor taxes may help to reduce unemployment without creating high budget deficits