Showing 1 - 10 of 11
In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB. We find that maximal insurance across this model range in terms of a Minimax policy comes at moderate...
Persistent link: https://www.econbiz.de/10005345043
In this note a one-state, one-control variable quadratic linear problem with robust control and discount factor is developed to examine the optimal response of the first-period control to changes in future model uncertainty. A change in future model uncertainty has an effect on the optimal...
Persistent link: https://www.econbiz.de/10005345244
Persistent link: https://www.econbiz.de/10005345657
In recent years, the learnability of rational expectations equilibria (REE) and determinacy of economic structures have rightfully joined the usual performance criteria among the sought after goals of policy design. And while some contributions to the literature (for example Bullard and Mitra...
Persistent link: https://www.econbiz.de/10005706334
Persistent link: https://www.econbiz.de/10005706804
In this paper we consider the quadratic optimal control problem with regime shifts and forward-looking agents. This extends the results of Zampolli (2003) who considered models without forward-looking expectations. Two algorithms are presented: The first algorithm computes the solution of a...
Persistent link: https://www.econbiz.de/10005132660
Persistent link: https://www.econbiz.de/10005132807
Persistent link: https://www.econbiz.de/10005132902
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...
Persistent link: https://www.econbiz.de/10005170571
By following the spirit in Favero and Milani (2005), we use recursive thick modeling to take into account model uncertainty for the choice of optimal monetary policy. We consider an open economy model and generate multiple models for only the aggregate demand and aggregate supply. Models are...
Persistent link: https://www.econbiz.de/10005537392