COGLEY, TIMOTHY; COLACITO, RICCARDO; HANSEN, LARS PETER; … - In: Journal of Money, Credit and Banking 40 (2008) 8, pp. 1599-1623
We study how a concern for robustness modifies a policymaker's incentive to experiment. A policymaker has a prior over two submodels of inflation-unemployment dynamics. One submodel implies an exploitable trade-off, the other does not. Bayes' law gives the policymaker an incentive to experiment....