Advanced Search
MyIDEAS: Login

Robust Delegation with Uncertain Monetary Policy Preferences

Contents:

Author Info

  • Marco M. Sorge
Registered author(s):

    Abstract

    Recent research has renewed interest in the exploration of the optimal design of monetary policy institutions in the presence of uncertainty. In this paper, we revisit the rationale for delegation to a weight-conservative central banker when the social planner’s knowledge about the true preferences of delegates is ex ante ambiguous and he exhibits a preference for robustness. In this context, a robust (worst-case oriented) delegation strategy is intended to minimize the maximum welfare loss over the uncertainty set, when no prior probability distribution for the preference bias (conservatism-gap) is available. We find that both over and underconservatism may emerge with respect to the certainty case, for robust delegation is shown to be model-dependent. Most importantly, under reasonable model’s parameterizations, Rogoff’s principle is reversed: it is optimal for society to appoint a weight-liberal central banker.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2012_05.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2012_05.

    as in new window
    Length:
    Date of creation: 05 Apr 2012
    Date of revision:
    Handle: RePEc:eei:rpaper:eeri_rp_2012_05

    Contact details of provider:
    Postal: Avenue de Beaulieu, 1160 Brussels
    Phone: +322 299 3523
    Fax: +322 299 3523
    Email:
    Web page: http://www.eeri.eu/index.htm
    More information through EDIRC

    Related research

    Keywords: Delegation; Conservative central bank; Preference uncertainty; Minmax policy.;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eei:rpaper:eeri_rp_2012_05

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia van Hove).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.