Robust Monetary Policy
While there is uncertainty about the data that enter into economic models and about the parameters that govern economic models, the fact that economists often approach macroeconomic data armed with different models of the economy suggests that uncertainty, or ambiguity, about the model could also be potentially important. A policy can be made “robust” to model uncertainty by designing it to perform well on average across all of the available fully specified models rather than to reign supreme in any particular model. In this paper we compare the implications of robust monetary policy versus non robust monetary policy for a model based on a new Keynesian model with two equations that represent the dynamics of inflation and the dynamics of the output gap. Using Matlab, we are able to approximate the solution to the linear–quadratic problem associated with the estimated model, thus obtaining the optimal monetary policy decision.
Volume (Year): 3 (2008)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: Bd.Expozitiei 1B, Bucuresti, Sector 1, Etaj 3, 012101|
Web page: http://www.rau.ro/
More information through EDIRC
References listed on IDEAS
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.:
- Leitemo, Kai & Söderström, Ulf, 2008.
"Robust Monetary Policy In The New Keynesian Framework,"
Cambridge University Press, vol. 12(S1), pages 126-135, April.
- Leitemo, Kai & Söderström, Ulf, 2004. "Robust Monetary Policy in the New-Keynesian Framework," CEPR Discussion Papers 4805, C.E.P.R. Discussion Papers.
- Kai Leitemo & Ulf Soderstrom, 2004. "Robust Monetary Policy in the New-Keynesian Framework," Working Papers 273, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Kai Leitemo & Ulf Söderström, 2005. "Robust monetary policy in the New-Keynesian framework," Macroeconomics 0508032, EconWPA.
- Dennis, Richard & Leitemo, Kai & Söderström, Ulf, 2009. "Methods for robust control," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1604-1616, August.
- Dennis, Richard & Leitemo, Kai & Söderström, Ulf, 2006. "Methods for Robust Control," CEPR Discussion Papers 5638, C.E.P.R. Discussion Papers.
- Richard Dennis & Kai Leitemo & Ulf Soderstrom, 2006. "Methods for Robust Control," Working Papers 307, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Richard Dennis & Kai Leitemo & Ulf Soderstrom, 2006. "Methods for Robust Control," 2006 Meeting Papers 493, Society for Economic Dynamics.
- Richard Dennis & Kai Leitemo & Ulf Söderström, 2006. "Methods for robust control," Working Paper Series 2006-10, Federal Reserve Bank of San Francisco.
- Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
- Glenn Rudebusch, 2000. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Econometric Society World Congress 2000 Contributed Papers 0065, Econometric Society.
- Glenn D. Rudebusch, 2000. "Assessing nominal income rules for monetary policy with model and data uncertainty," Working Paper Series 2000-03, Federal Reserve Bank of San Francisco.
- Rudebusch, Glenn D., 2000. "Assessing nominal income rules for monetary policy with model and data uncertainty," Working Paper Series 0014, European Central Bank.
- Hansen, Lars Peter & Sargent, Thomas J., 2003. "Robust control of forward-looking models," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 581-604, April.
- Giordani, Paolo & Soderlind, Paul, 2004. "Solution of macromodels with Hansen-Sargent robust policies: some extensions," Journal of Economic Dynamics and Control, Elsevier, vol. 28(12), pages 2367-2397, December.
- Giordani, Paolo & Söderlind, Paul, 2002. "Solution of Macromodels with Hansen-Sargent Robust Policies: Some Extensions," SSE/EFI Working Paper Series in Economics and Finance 499, Stockholm School of Economics, revised 15 May 2003.
- Backus, David & Driffill, John, 1986. "The Consistency of Optimal Policy in Stochastic Rational Expectations Models," CEPR Discussion Papers 124, C.E.P.R. Discussion Papers. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:rau:journl:v:3:y:2008:i:2:p:19-28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alex Tabusca)
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.