Our objectives are: to quantify the stabilization welfare gains from commitment; to examine how commitment to an optimal rule can be sustained as an equilibrium; to find a simple interest rate rule that approximates the optimal commitment one. We utilize an empirical micro-founded euro-area DSGE...

This paper revisits a widely adopted approach to robust decision making developed by (Hansen and Sargent, 2003) and (Hansen and Sargent, 2008)--henceforth HS--and applies it to monetary policy design in the face of model uncertainty. We pay particular attention to two issues: first, we...