Influence of Parameter Estimation Uncertainty on the European Central Banker Behavior: An Extension

Jean-Guillaume Sahuc

No 02-18, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: This paper deals with the linear quadratic stochastic control approach to assessing the effects of parameter estimation uncertainty on the central banker behavior. The treatment of parameter estimation uncertainty is covered by the introduction of the full variance-covariance matrix of the parameters estimates in the optimal control theory. The proposed approach is simple to implement and is applicable to a large class of model. The principle of conservatism of Brainard is found empirically relevant for a Euro area policymaker.

Keywords: European monetary policy; parameter estimation uncertainty; linear quadratic stochastic control (search for similar items in EconPapers)
JEL-codes: C61 D81 E58 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eve:wpaper:02-18

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