In this paper we develop a framework to analyze the optimal policy of an inflation-targeting monetary authority that is not fully confident about its model and the degree of mistrust changes over time as the structure of the economy changes. These changes can include structural breaks as well as...

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...

The choice of monetary policy is the most important concern of central banks, but this choice is always confronted with two relevant aspects of economic policy: parameter instability and model uncertainty. This paper deals with both types of uncertainty and shows that recursive thick modeling is...