Optimal monetary policy delegation in a small-open new Keynesian model with robust control

Daisuke Ida and Mitsuhiro Okano

Economic Modelling, 2023, vol. 120, issue C

Abstract: This study examines the optimal monetary policy delegation in a small-open new Keynesian model with model uncertainty. We show that under the worst-case equilibrium, nominal income growth targeting outperforms the considered alternative delegation regimes. We find that the response of the nominal exchange rate depends on the specifications of the delegated targeting regimes. Finally, introducing endogenous inflation persistence into the benchmark model does not affect our main findings.

Keywords: Optimal monetary policy; Targeting regime; Robust control; Small-open economy; New Keynesian model (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322003911

DOI: 10.1016/j.econmod.2022.106154

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