We construct a theory of forward guidance in economic policy making in order to provide a framework for explaining the role and strategic advantages of including forward guidance as an explicit part of policy design. We do this by setting up a general policy problem in which forward guidance plays a role, and then examine the consequences for performance when that guidance is withdrawn. We show that forward guidance provides enhanced controllability and stabilizability—especially where such properties may not otherwise be available. As a by-product, we find that forward guidance limits the scope and incentives for time-inconsistent behavior in an economy whose policy goals are ultimately reachable. It also adds to the credibility of a set of policies.

In this paper, we consider the well-known Fattorini’s criterion for approximate controllability of infinite dimensional linear systems of type y′ = Ay + Bu. We precise the result proved by Fattorini in [H.O. Fattorini, SIAM J. Control 4 (1966) 686–694.] for bounded input B, in the case where B can be unbounded or in the case of finite-dimensional controls. More precisely, we prove that if Fattorini’s criterion is satisfied and if the set of geometric multiplicities of A is bounded then approximate controllability can be achieved with finite dimensional controls. An important consequence of this result consists in using the Fattorini’s criterion to obtain the feedback stabilizability of linear and nonlinear parabolic systems with feedback controls in a finite dimensional space. In particular, for systems described by partial differential equations, such a criterion reduces to a unique continuation theorem for a stationary system. We illustrate such a method by tackling some coupled Navier−Stokes type equations (MHD system and micropolar fluid system) and we sketch a systematic procedure relying on Fattorini’s criterion for checking stabilizability of such nonlinear systems. In that case, the unique continuation theorems rely on local Carleman inequalities for stationary Stokes type systems.

We analyze the stability and stabilizability properties of mixed retarded-neutral typesystems when the neutral term may be singular. We consider an operator differentialequation model of the system in a Hilbert space, and we are interested in the criticalcase when there is a sequence of eigenvalues with real parts converging to zero. In thiscase, the system cannot be exponentially stable, and we study conditions under which itwill be strongly stable. The behavior of spectra of mixed retarded-neutral type systemsprevents the direct application of retarded system methods and the approach of pureneutral type systems for the analysis of stability. In this paper, two techniques arecombined to obtain the conditions of asymptotic non-exponential stability: the existenceof a Riesz basis of invariant finite-dimensional subspaces and the boundedness of theresolvent in some subspaces of a special decomposition of the state space. For unstablesystems, the techniques introduced enable the concept of regular strong stabilizabilityfor mixed retarded-neutral type systems to be analyzed.