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Robust Control: A Note on the Timing of Model Uncertainty

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Author Info
Arnulfo Rodriguez ()
Abstract

In this note a one-state, one-control variable quadratic linear problem with robust control and discount factor is developed to examine the optimal response of the first-period control to changes in future model uncertainty. A change in future model uncertainty has an effect on the optimal first-period control response going in the same direction as the one caused by an equal size change in current model uncertainty. However, both analytical and numerical results show that such effect is much lower than the one derived from a change in current model uncertainty. Moreover, such effect is even much lower as the change in model uncertainty moves farther away into the future. Finally, the infinite horizon result confirms the reinforcing nature of the effects on the optimal first-period control response of current and future changes in model uncertainty. Copyright Kluwer Academic Publishers 2004

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File URL: http://hdl.handle.net/10.1007/s10614-004-3695-9
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Publisher Info
Article provided by Springer in its journal Computational Economics.

Volume (Year): 24 (2004)
Issue (Month): 3 (July)
Pages: 209-221
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:compec:v:24:y:2004:i:3:p:209-221

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Web page: http://www.springerlink.com/link.asp?id=100248

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Related research
Keywords: macroeconomic policy; model uncertainty; optimal control; robustness;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hansen, Lars Peter & Sargent, Thomas J & Tallarini, Thomas D, Jr, 1999. "Robust Permanent Income and Pricing," Review of Economic Studies, Blackwell Publishing, vol. 66(4), pages 873-907, October. [Downloadable!] (restricted)
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  2. Hans M. Amman & David A. Kendrick & Heinz Neudecker, 1994. "Numerical Steady State Solutions for Nonlinear Dynamic Optimization Models," Economics, University of Texas at Austin 9503, Center for Applied Research in Economics.
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  3. Mercado, P. Ruben & Kendrick, David A., 2000. "Caution in macroeconomic policy: uncertainty and the relative intensity of policy," Economics Letters, Elsevier, vol. 68(1), pages 37-41, July. [Downloadable!] (restricted)
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  4. P. Ruben Mercado, 2004. "The Timing of Uncertainty and the Intensity of Policy," Computational Economics, Springer, vol. 23(4), pages 303-313, 06. [Downloadable!]
  5. Arnulfo Rodriguez & Fidel Gonzalez, 2004. "Robust Control: A Note on the Response of the Control to Changes in the," Computing in Economics and Finance 2004 114, Society for Computational Economics.
  6. Hans M. Amman & David A. Kendrick, 1996. "The DUALI/DUALPC Software for Optimal Control Models: Introduction," Economics, University of Texas at Austin 9602, Center for Applied Research in Economics. [Downloadable!]
  7. Stan Žaković & Volker Wieland & Berc Rustem, 2007. "Stochastic Optimization and Worst-Case Analysis in Monetary Policy Design," Computational Economics, Springer, vol. 30(4), pages 329-347, November. [Downloadable!] (restricted)
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  8. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1, March. [Downloadable!]
  9. Hans M. Amman & David A. Kendrick, 2003. "A Classification System for Economic Stochastic Control Models," Computing in Economics and Finance 2003 114, Society for Computational Economics.
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  10. J. Tetlow, Robert & von zur Muehlen, Peter, 2001. "Robust monetary policy with misspecified models: Does model uncertainty always call for attenuated policy?," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 911-949, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fidel Gonzalez, 2008. "Optimal Policy Response with Control Parameter and Intercept Covariance," Computational Economics, Springer, vol. 31(1), pages 1-20, February. [Downloadable!] (restricted)
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