Robust Control: A Note on the Timing of Model Uncertainty

Arnulfo Rodriguez

No 147, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: In this note a one-state, one-control variable quadratic linear problem with robust control and discount factor is developed to examine the optimal response of the first-period control to changes in future model uncertainty. A change in future model uncertainty has an effect on the optimal first-period control response going in the same direction as the one caused by an equal size change in current model uncertainty. However, both analytical and numerical results show that such effect is much lower than the one derived from a change in current model uncertainty. Moreover, such effect is even much lower as the change in model uncertainty moves farther into the future. Finally, the infinite horizon result confirms the reinforcing nature of the effects on the optimal first-period control response of current and future changes in model uncertainty.

Keywords: optimal control; model uncertainty; robustness; macroeconomic policy (search for similar items in EconPapers)
JEL-codes: C61 E61 (search for similar items in EconPapers)
Date: 2004-08-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://repec.org/sce2004/up.20013.1077774780.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf4:147

Access Statistics for this paper

More papers in Computing in Economics and Finance 2004 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().