This paper studies the design of optimal time-consistent monetary policy in an economy where the planner trusts its own model, while a representative household uses a set of alternative probability distributions governing the evolution of the exogenous state of the economy. In such environments,...

The formation of macroeconomic policy is conceptualized as on-going process of interaction between private individuals and a centralized policymaker. This interaction is inherently strategic in nature and lends itself to a game-theoretical treatment. Starting from the basic principle of rational...