Model uncertainty and monetary policy

  • 0 Ratings
  • 0 Want to read
  • 0 Currently reading
  • 0 Have read
Model uncertainty and monetary policy
Richard Dennis
Not in Library

My Reading Lists:

Create a new list

Check-In

×Close
Add an optional check-in date. Check-in dates are used to track yearly reading goals.
Today

  • 0 Ratings
  • 0 Want to read
  • 0 Currently reading
  • 0 Have read

Buy this book

Last edited by MARC Bot
December 19, 2020 | History

Model uncertainty and monetary policy

  • 0 Ratings
  • 0 Want to read
  • 0 Currently reading
  • 0 Have read

Model uncertainty has the potential to change importantly how monetary policy should be conducted, making it an issue that central banks cannot ignore. In this paper, I use a standard new Keynesian business cycle model to analyze the behavior of a central bank that conducts policy with discretion while fearing that its model is misspecified. I begin by showing how to solve linear-quadratic robust Markov-perfect Stackelberg problems where the leader fears that private agents form expectations using the misspecified model. Next, I exploit the connection between robust control and uncertainty aversion to present and interpret my results in terms of the distorted beliefs held by the central bank, households, and firms. My main results are as follows. First, the central bank's pessimism leads it to forecast future outcomes using an expectations operator that, relative to rational expectations, assigns greater probability to extreme inflation and consumption outcomes. Second, the central bank's skepticism about its model causes it to move forcefully to stabilize inflation following shocks. Finally, even in the absence of misspecification, policy loss can be improved if the central bank implements a robust policy.

Publish Date
Language
English

Buy this book

Edition Availability
Cover of: Model uncertainty and monetary policy
Model uncertainty and monetary policy
2007, Federal Reserve Bank of San Francisco
electronic resource / in English

Add another edition?

Book Details


Edition Notes

Title from PDF file (viewed on Sept. 13, 2007).

"May 2007."

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.

Published in
San Francisco]
Series
FRBSF working paper -- 2007-09, FRBSF working paper (Online) -- #2007-09.

Classifications

Library of Congress
HB1

The Physical Object

Format
[electronic resource] /

ID Numbers

Open Library
OL31800199M
LCCN
2007615347

Community Reviews (0)

Feedback?
No community reviews have been submitted for this work.

Lists

This work does not appear on any lists.

History

Download catalog record: RDF / JSON
December 19, 2020 Created by MARC Bot import new book