Robust Control and the Monetary Policy Delegation

Giuseppe Diana () and Moïse Sidiropoulos ()
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Giuseppe Diana: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique
Moïse Sidiropoulos: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper adapts in a simple static context the Rogo§ís (1985) analysis of monetary policy delegation to a conservative central banker to the robust control framework. In this framework, uncertainty means that policymakers are unsure about their model, in the sense that there is a group of approximate models that they also consider as possibly true, and their objective is to choose a rule that will work under a range of di§erent model speciÖcations. We Önd that robustness reveals the emergence of a precautionary behaviour in the case of unstructured model uncertainty, reducing thus governmentís willingness to delegate monetary policy to a conservative central banker.

Keywords: Robust control; Monetary policy delegation; Central bank conservativeness (search for similar items in EconPapers)
Date: 2007
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Published in Massimo Salzano; David Colander. Complexity Hints for Economic Policy, Springer Verlag, pp.303-310, 2007, New economic windows, 978-88-470-0533-4

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00279478

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