We study the design of optimal monetary policy under uncertainty in a dynamic stochastic general equilibrium models. We … use a Markov jump-linear-quadratic (MJLQ) approach to study policy design, approximating the uncertainty by different … a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active …

uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model … uncertainty our framework encompasses includes: simple i.i.d. model deviations; serially correlated model deviations; estimable … regime-switching models; more complex structural uncertainty about very different models, for instance, backward- and forward …

The foreign exchange risk premium in an exchange rate target zone regime with devaluation/realignment risks is derived … devaluation/realignment risk, is taken into account. The risk premium is then the sum of two separate risk premia, arising from … real and nominal exchange rate premia are considered. The real and nominal risk premia from movements within the band are …

-market economies. The chapter discusses the history, macroeconomic effects, theory, practice, and future of inflation targeting …