Policy Choice in Time Series by Empirical Welfare Maximization

Abstract

This paper develops a novel method for policy choice in a dynamic setting where the available data is a multivariate time series. Overcoming challenges unique to time-series setting such as time-varying environments, history-dependent welfare, dynamic causal effects, and statistical dependence, we propose Time-series Empirical Welfare Maximization (T-EWM) methods. We characterize conditions for T-EWM to consistently learn optimal policies conditional or unconditional on the time-series history, and derive nonasymptotic upper bounds for the welfare regrets. We illustrate a use of T-EWM for optimal restriction rules against Covid-19.