Three Essays on Robustness and Asymmetries in Central Bank Forecasting
AbstractThis paper introduces asymmetric central bank forecasting into the standard New Keynesian model within the context of robust control theory. Asymmetric forecasting expresses policymakersf reservations about economic forecasts, and the degree of their reservations is reflected as an asymmetric preference whose existence warrants laying aside the assumption that policymakersf base decisions primarily on rational expectations. This study concludes that monetary policy becomes more aggressive because of policymakersf reservations about forecasts stemming from asymmetry, and preference for policies robust enough to overcome unanticipated situations. In addition, adopted policies will likely amplify economic fluctuations and significantly reduce social welfare.
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Bibliographic InfoPaper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 1216.
Date of creation: Aug 2012
Date of revision:
robust control; asymmetric forecasting; bounded rationality;
Find related papers by JEL classification:
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-CBA-2012-09-09 (Central Banking)
- NEP-FOR-2012-09-09 (Forecasting)
- NEP-MAC-2012-09-09 (Macroeconomics)
- NEP-MON-2012-09-09 (Monetary Economics)
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