This paper uses a small, calibrated forward-looking model of the euro-area economy to investigate the implications of incomplete information about potential output for the conduct and the design of monetary policy. Three sets of issues are examined. First, the certainty-equivalent optimal policy...

This paper develops and simulates a three-period life-cycle model with aggregate uncertainty. The model incudes a market in risk-free bonds. The paper studies how uncertainty in fiscal policy affects welfare, the equity premium, risk-sharing, and the caculation of generational accounts.

When a central bank operates with multiple, non-nested models of the economy, generally no single policy rule will be optimal across within alternate models. In this context, Levin and Williams (2003) introduce the notion of fault tolerance of policy rules, that is, the performance of policy...

Applied cryptography and network security could bring a new commerce architecture for valuable but uncertain digital objects in an open network. This paper models the digital objects as security token, which is abbreviated into a word coinage setok. Each setok has its price, values, and...

In his monograph The Conquest of American Inflation, Sargent (1999) points out the perils of econometric policy evaluation of the Theil-Tinbergen tradition wherein one estimates a reduced form econometric model of the economy and subjects it to control. If the model is misspecified, as is...

In this paper we present an algorithm for continuous minimax problem where a quasi--Newton direction conditional on appropriate maximizers is used. The direction involves a quadratic subproblem to compute the minimum norm subgradient. An application of the algorithm to a monetary policy design...

For policymakers, thinking about best practice monetary policy means thinking about uncertainty. Open economy monetary policymakers face an additional source of uncertainty – exchange rate dynamics. This paper identifies policy rules robust to the open economy inflation targeters face in...

Dynamic stochastic general equilibrium models have begun to dominate the field of macroeconomic theory and policy making. In this paper, I present the first estimation results of investment expenditure for the french economy, applying the bayesian estimation approach of DSGE models. first, I...