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Robust Monetary Policy in An Uncertain Economic Environment: Evidence from Tunisian Economy

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  • Ramzi Drissi

Abstract

This paper tries to study the robust monetary policy in an uncertain economic environment. More precisely, our idea is to know how to conduct monetary policy in the case that the central bank does not correctly perceive the true model. Our approach is to estimate a dynamic macroeconomic model with three representations of dynamics inflation, each with microeconomic foundations. The three versions of model are estimated on Tunisian economy data with the Bayesian techniques. Our results show that the uncertainties of the structural parameters affect the dynamic solutions for the economy, but also on the objective functions of the central bank. His caution increased with the weights carried by the interest rate in the loss function. Thus, our results show the effectiveness of the simple robust rule of Levin and Williams.

Suggested Citation

  • Ramzi Drissi, 2014. "Robust Monetary Policy in An Uncertain Economic Environment: Evidence from Tunisian Economy," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 969-986.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:7:p:969-986:id:1228
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    Cited by:

    1. Drissi, Ramzi & Ghassan, Hassan Belkacem, 2018. "Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting," MPRA Paper 95174, University Library of Munich, Germany, revised Apr 2019.

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