The limits to robust monetary policy in a small open economy with learning agents

Marine André and Meixing Dai ()

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: We study in a small open economy New Keynesian model the consequences of adaptive learning for the design of optimal robust monetary policy. Compared to the rational expectations equilibrium, we find that the possiblity to conduct robust monetary policy is extremely limited in the open economy when private agents are learning. The misspecification that can be introduced into all equations of the model is very small and approaches zero at high speed as the learning gain rises.

Keywords: Robust control; model uncertainty; adaptive learning; optimal monetary policy; small open economy. (search for similar items in EconPapers)
JEL-codes: C62 D83 D84 E52 E58 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Related works:
Working Paper: The limits to robust monetary policy in a small open economy with learning agents (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2018-45

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