Exchange rate system simulation by means of vector processing

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Abstract
This paper presents optimal control simulations in order to evaluate the major types of exchange rate systems for a small open economy. This is done by using a macroeconometric model of the Dutch economy. The econometric models relevant for ex change rate policy evaluation contain a large number of equa tions. In applying optimal control techniques to such models, computational difficulties are encountered. However, these pro blems can be overcome if the algorithm of the control problem is reformulated to be effectively utilized on a computer with vec tor processing capabilities.