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Robust Control and the Monetary Policy Delegation

Author

Listed:
  • Giuseppe Diana

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Moïse Sidiropoulos

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper adapts in a simple static context the Rogo§ís (1985) analysis of monetary policy delegation to a conservative central banker to the robust control framework. In this framework, uncertainty means that policymakers are unsure about their model, in the sense that there is a group of approximate models that they also consider as possibly true, and their objective is to choose a rule that will work under a range of di§erent model speciÖcations. We Önd that robustness reveals the emergence of a precautionary behaviour in the case of unstructured model uncertainty, reducing thus governmentís willingness to delegate monetary policy to a conservative central banker.

Suggested Citation

  • Giuseppe Diana & Moïse Sidiropoulos, 2007. "Robust Control and the Monetary Policy Delegation," Post-Print hal-00279478, HAL.
    • Handle: RePEc:hal:journl:hal-00279478
    as

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