Monetary Policy Under Uncertainty: Min-Max vs Robust-Satisficing Strategies

Arbeitspapier

We study monetary policy under uncertainty. A policy which ameliorates a worst case may differ from a policy which maximizes robustness and satisfices the performance. The former strategy is min-maxing and the latter strategy is robust-satisficing. We show an "observational equivalence" between robust-satisficing and min-maxing. However, there remains a "behavioral difference" between robust-satisficing and min-maxing. Policy makers often wish to respect specified bounds on target variables. The robust-satisficing policy can be more (and is never less) robust, and hence more dependable, than the min-max policy. We illustrate this in an empirical example where monetary policy making amounts to selecting the coefficients of a Taylor-type interest rate rule, subject to uncertainty in the persistence of shocks to inflation.

Angaben zum Objekt

• ISBN: 978-82-7553-398-0
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2007/6

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Monetary Policy ; Central Banks and Their Policies
• Thema: Knightian uncertainty ; robustness ; info-gap decision theory ; monetary policy ; min-max policy ; robust-satisficing policy

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ben-Haim, Yakov ; Akram, Q. Farooq ; Eitrheim, Øyvind
• Ereignis: Veröffentlichung
• (wer): Norges Bank
• (wo): Oslo
• (wann): 2007

Weitere Informationen

• Handle: http://hdl.handle.net/10419/209882
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ