Robust Control and Monetary Policy Delegation
This paper adapts in a simple static context the Rogoff's (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 specifications. We find that robustness reveals the emergence of a precautionary behaviour in the case of unstructured model uncertainty, reducing thus government's willingness to delegate monetary policy to a conservative central banker.
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- Giordani, Paolo & Soderlind, Paul, 2004.
"Solution of macromodels with Hansen-Sargent robust policies: some extensions,"
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- 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.
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- Onatski, Alexei & Williams, Noah, 2002. "Modeling model uncertainty," Working Paper Series 0169, European Central Bank.
- Alexei Onatski & Noah Williams, 2003. "Modeling Model Uncertainty," NBER Working Papers 9566, National Bureau of Economic Research, Inc.
- Walsh, Carl E, 2004. "Robustly Optimal Instrument Rules and Robust Control: An Equivalence Result," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1105-1113, December.
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