Several research contributions have argued that information about the output gap is essential for a good monetary policy rule. However, as pointed out by Orphanides (2001), there is considerable real-time uncertainty about the size of the output gap. The paper argues that simple monetary policy...

We estimate the interdependence between US monetary policy and the S&P 500 using structural vector autoregressive (VAR) methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions...

We use robust control techniques to study the effects of model uncertainty on monetary policy in an estimated, semi-structural, small-open-economy model of the U.K. Compared to the closed economy, the presence of an exchange rate channel for monetary policy not only produces new trade-offs for...

Robust control allows policymakers to formulate policies that guard against model misspecification. The principal tools used to solve robust control problems are state-space methods [see Hansen, L.P., Sargent T.J., 2008. Robustness. Princeton University Press; Giordani, P., Söderlind, P., 2004....

The credibility problems of monetary policy are enlarged by transmission lags whenever the welfare criterion consists of arguments with differing transmission lags. If, as usually argued, prices react to monetary policy with a longer lag than output, the discretionary bias is substantially...

We study the effects of model uncertainty in a simple New-Keynesian model using robust control techniques. Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analysing both instrument rules and targeting rules under different timing...

This note discusses the inflation-targeting strategy if price setting gives rise to a hybrid Phillips curve. The strategy is inverted relative to private sector pricing behavior: if private sector price setting is backward-looking, policy should be forward-looking, and vice versa.