Consider a central bank that can adjust the in ation rate by increasing and decreasing the level of the key interest rate. Each intervention gives rise to proportional costs, and the central bank faces also a running penalty, e.g., due to misaligned levels of in ation and interest rate. We model...

We consider a standard Brownian motion whose drift can be increased or decreased in a possibly singular manner. The objective is to minimize an expected functional involving the time-integral of a running cost and the proportional costs of adjusting the drift. The resulting two-dimensional...

We consider a standard Brownian motion whose drift can be increased or decreased in a possibly singular manner. The objective is to minimize an expected functional involving the time-integral of a running cost and the proportional costs of adjusting the drift. The resulting two-dimensional...

Consider a central bank that can adjust the in ation rate by increasing and decreasing the level of the key interest rate. Each intervention gives rise to proportional costs, and the central bank faces also a running penalty, e.g., due to misaligned levels of in ation and interest rate. We model...