Robust Versus Optimal Rules in Monetary Policy: A Note
June 1, 2004
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Summary
We provide a framework for analyzing the choice between optimal and robust monetary policy rules in the presence of paradigm uncertainty. We first discuss the conditions on uncertainty that render a robust rule preferable to an optimal rule. Second, we show how the degree of risk aversion of the policymaker increases the region in which the robust rule is preferred.
Subject: Banking, Econometric models
Keywords: central bank, WP
Pages:
10
Volume:
2004
DOI:
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Issue:
096
Series:
Working Paper No. 2004/096
Stock No:
WPIEA0962004
ISBN:
9781451851946
ISSN:
1018-5941
