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How Robust is Robust Control in the Time Domain?

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  • Marco P. Tucci

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Abstract

By applying robust control the decision maker wants to make good decisions when his model is only a good approximation of the true one. Such decisions are said to be robust to model misspecification. In this paper it is shown that both a “probabilistically sophisticated” and a non-“probabilistically sophisticated” decision maker applying robust control in the time domain are indeed assuming a very special kind of “misspecification of the approximating model.” This is true when unstructured uncertainty à la Hansen and Sargent is used or when uncertainty is related to unknown structural parameters of the model

Suggested Citation

  • Marco P. Tucci, 2009. "How Robust is Robust Control in the Time Domain?," Department of Economics University of Siena 569, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:569
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    File URL: http://repec.deps.unisi.it/quaderni/569.pdf
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    References listed on IDEAS

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    1. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
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    4. Tetlow, Robert J. & von zur Muehlen, Peter, 2001. "Simplicity versus optimality: The choice of monetary policy rules when agents must learn," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 245-279, January.
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    8. Michael Woodford, 1999. "Optimal monetary policy inertia," Proceedings, Federal Reserve Bank of San Francisco.
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    More about this item

    Keywords

    Linear quadratic tracking problem; optimal control; robust control; time-varying parameters;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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