Implications of parameter uncertainty for monetary policy in a simple Euro area model

Hervé Le Bihan and Jean-Guillaume Sahuc

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Abstract: The `Brainard conservatism principle' states that the optimal monetary policy rule should be less aggressive when uncertainty about parameters is taken into account. However, this principle is not fully general and may be reversed in some cases. This paper examines the implications of parameter uncertainty for monetary policy using a simple empirical model of the Euro area. The Brainard principle is found to be empirically relevant.

Date: 2010-10
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Published in Applied Economics Letters, 2010, 9 (2), pp.553-556. ⟨10.1080/13504850110108067⟩

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Journal Article: Implications of parameter uncertainty for monetary policy in a simple Euro area model (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02878036

DOI: 10.1080/13504850110108067

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