Robust Monetary Policy under Model Uncertainty and Inflation Persistence

Li Qin, Moise Sidiropoulos and Eleftherios Spyromitros

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper examines the relationship between the preference for ro- bustness of central bank (when it fears that its model is misspecified), the inflation persistence and the output cost of disinflation. Using a simple monetary game model in which higher preference for robustness of central bank is positively associated with the inflation persistence and thus nega- tively with the speed of disinflation, this paper shows that the output cost of disinflation is higher when the less the central bank believes that its reference model is robust.

Keywords: Model uncertainty; Robust control; Minmax policies; Inflation persistence; Sacrifice ratio. (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Robust monetary policy under model uncertainty and inflation persistence (2013)
Working Paper: Robust monetary policy under model uncertainty and inflation persistence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2009-09

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