On Credible Monetary Policies under Model Uncertainty

Ignacio Presno and Anna Orlik
Additional contact information
Ignacio Presno: Universidad de Montevideo
Anna Orlik: Federal Reserve Board of Governors

No 1280, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the design of optimal time-consistent monetary policy in an economy where the planner trusts his 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, unlike in the original studies of time-consistent monetary policy, management of households’ expectations becomes an active channel of optimal policymaking per se; a feature that our paternalistic government seeks to exploit. We adapt recursive methods in the spirit of Abreu, Pearce, and Stacchetti (1990) as well as computational algorithms based on Judd, Yeltekin, and Conklin (2003) to fully characterize the equilibrium outcomes for a class of policy games between the government and a representative household that distrusts the model used by the government.

Date: 2016
New Economics Papers: this item is included in nep-cmp and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2016/paper_1280.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1280

Access Statistics for this paper

More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().