In this paper an analytical framework using robust control was developed for the one-state, one-control variable model to examine the response of the control to changes in the quot;freequot; parameter. It was found that the response is characterized by a hyperbolic shape

In this paper an analytical framework similar to a robust control problem was developed for the one-state, one-control variable model to examine the response of the control variable to change in the quot;freequot; parameter. However, in contrast to Gonzalez and Rodriguez (2003), the sign...

Uncertainty about the persistence of periods characterized by large price shocks is an important aspect of monetary policy. This type of uncertainty posed some difficulties for central banks in 2004. This paper formalizes the treatment of this type of uncertainty by solving an optimal control...