Policy Implications of Solutions of Dynamic Optimal Production Problems for Disinflationary Economic Policies

Abstract

The speed of the application of current economic policies that are being followed in Turkey is a very important question. This paper uses the results of the solutions of optimal control theoretic inventory and production problems for companies to offer opinions on this question under various assumptions on interest rates. The most important result of the paper is that the rate of decline of interest rates is as important as the absolute level of interest rates for investors to start investing in inventories (consequently in machinery and other production infrastructure) which, in turn, implies growth of the economy.Disinflation, Control Theory, Economic Policy