Robust control in a Sticky information economy

Francesco Giuli

No 98, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: This paper analyzes the behavior of a central bank under strong (Knightian) uncertainty when the short run trade-off between output and inflation is represented by the Sticky Information Phillips Curve recently proposed by Mankiw and Reis (2002). By solving the robust control problem analytically, this paper elucidates the economic mechanisms at play in a sticky information economy and shows how and why the robust monetary policy in this economy differs from the optimal one identified by Ball, Mankiw and Reis (2005).

Keywords: Robust control; sticky information; minmax policies. (search for similar items in EconPapers)
JEL-codes: D81 E52 E58 (search for similar items in EconPapers)
Pages: 37
Date: 2007-04
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