IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Guarding Against Large Policy Errors under Model Uncertainty

  • Gino Cateau
Registered author(s):

    How can policy-makers avoid large policy errors when they are uncertain about the true model of the economy? The author discusses some recent approaches that can be used for that purpose under two alternative scenarios: (i) the policy-maker has one reference model for choosing policy but cannot take a stand as to how that model is misspecified, and (ii) the policy-maker, being uncertain about the economy's true structure, entertains multiple distinct models of the economy. The author shows how these approaches can be implemented in practice using as benchmark models simplified versions of Fuhrer and Moore (1995) and Christiano, Eichenbaum, and Evans (2005).

    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:
    Download Restriction: no

    Paper provided by Bank of Canada in its series Staff Working Papers with number 06-13.

    in new window

    Length: 62 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:bca:bocawp:06-13
    Contact details of provider: Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
    Phone: 613 782-8845
    Fax: 613 782-8874
    Web page:

    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.:

    as in new window
    1. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    2. Denise Côté & John Kuszczak & Jean-Paul Lam & Ying Liu & Pierre St-Amant, 2002. "The Performance and Robustness of Simple Monetary Policy Rules in Models of the Canadian Economy," Technical Reports 92, Bank of Canada.
    3. repec:cup:macdyn:v:6:y:2002:i:1:p:111-44 is not listed on IDEAS
    4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    5. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
    6. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    7. Giannoni, Marc P., 2002. "Does Model Uncertainty Justify Caution? Robust Optimal Monetary Policy In A Forward-Looking Model," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 111-144, February.
    8. Alexei Onatski & Noah Williams, 2003. "Modeling Model Uncertainty," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1087-1122, 09.
    9. Gino Cateau, 2005. "Monetary Policy under Model and Data-Parameter Uncertainty," Staff Working Papers 05-6, Bank of Canada.
    10. Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
    11. Haluk Ergin & Faruk Gul, 2004. "A subjective theory of compound lotteries," Econometric Society 2004 North American Summer Meetings 152, Econometric Society.
    12. Stephen Murchison & Andrew Rennison & Zhenhua Zhu, 2004. "A Structural Small Open-Economy Model for Canada," Staff Working Papers 04-4, Bank of Canada.
    13. Engert, Walter & Selody, Jack, 1998. "Uncertainty and Multiple Paradigms of the Transmission Mechanism," Staff Working Papers 98-7, Bank of Canada.
    14. Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
    15. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:06-13. 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: ()

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.