A Worst--Case Approach to Inflation Zone Targeting

B. Rustem, V. W. Wieland and S. Zakovic
Authors registered in the RePEc Author Service: Volker Wieland

No 15, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: In this paper we present an algorithm for continuous minimax problem where a quasi--Newton direction conditional on appropriate maximizers is used. The direction involves a quadratic subproblem to compute the minimum norm subgradient. An application of the algorithm to a monetary policy design is given. A simple model, due to Orphanides and Wieland, is used for practice of inflation zone targeting. In this paper, however, the approach is different as we minimize the worst--case with respect to inflation and economic activity. Also a comparison with the $H^infinity approach is included.

Keywords: minimax optimization; inflation targeting; uncertainty (search for similar items in EconPapers)
JEL-codes: C61 E43 (search for similar items in EconPapers)
Date: 2001-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf1:15

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