The authors adapt modern control theoretic techniques based on robust control theory to economic modelling and decision making. The main motivation behind the proposed approach is that concern about model misspecification in economics leads to decision strategies that work over the set of nearby...

A decision maker suspects that parameters of a set of structured parametric probability models vary over time in unknown ways that he does not describe probabilistically. He expresses a fear that all of these parametric models are misspeci ed by also wanting to consider alternative unstructured...

We study how the optimal degree of conservatism relates to decision-making procedures in a Monetary Policy Committee (MPC). In our framework, central bank conservatism is required to attenuate the volatility of monetary decisions generated by the presence of uncertainty about the committee...

A representative consumer uses Bayes' law to learn about parameters of several models and to construct probabilities with which to perform ongoing model averaging. The arrival of signals induces the consumer to alter his posterior distribution over models and parameters. The consumer's...

A decision maker is averse to not knowing a prior over a set of restricted structured models (ambiguity) and suspects that each structured model is misspecified. The decision maker evaluates intertemporal plans under all of the structured models and, to recognize possible misspecifications,...

The paper examines the optimal combination of central bank independence and conservatism in the presence of uncertain central bank preferences. We develop a model of endogenous monetary policy delegation in which government chooses the central bank's degree of inde-pendence and conservatism so...

The enlargement of the European Monetary Union is likely to lead to an increase in uncertainty regarding the transmission of monetary policy for the larger union. Adding new members to the central bank council will in addition imply that the policy reaction of the enlarged council will be...