Methods for Robust Control

Richard Dennis, Kai Leitemo and Ulf Söderström ()

No 493, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: Robust control allows policymakers to formulate policies that guard against model misspecification. The principal tools used to solve robust control problems are state-space methods (see Hansen and Sargent, 2005, and Giordani and Soderlind, 2004). In this paper we show that the structural-form methods developed by Dennis (2005a) to solve control problems with rational expectations can also be applied to robust control problems, with the advantage that they bypass the task, often onerous, of having to express the reference model in a state-space form. Interestingly, state-space and structural-form methods do not necessarily return the same equilibria for robust control problems. We apply both state-space and structural solution methods to an empirical New Keynesian business cycle model and find that the differences between the methods are both qualitatively and quantitatively important. In particular, with the structural-form solution methods the specification errors generally involve changes to the conditional variances in addition to the conditional means of the shock processes

Keywords: Robust Control; Misspecification; Optimal Policy (search for similar items in EconPapers)
JEL-codes: C61 E52 E58 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Methods for robust control (2009)
Working Paper: Methods for Robust Control (2006)
Working Paper: Methods for robust control (2006)
Working Paper: Methods for Robust Control (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:493

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