Robust Monetary Policy in a Financially Vulnerable Economy

So far the literature on robust monetary policy has used, without exception, very simplified economic models, and with only one exception, assuming closed economy.
This paper evaluates topics that are in the research agenda in a more complete and complex set of (open economy) economic models applying the Hansen-Sargent robust control approach. In particular, we are interested in answering the following questions: is the optimal robust monetary policy more aggressive than the standard optimal rational expectation (RE) monetary policy? Are the variances of output and inflation magnified under optimal robust monetary policy? And, more generally, does the introduction of optimal robust monetary policy alter some general conclusions that are established based on the standard RE optimal monetary policy?
In the context of our reference model, we found that the answer to the first two questions is: not necessarily; and to the third one is yes. The answer to the first two questions contradict some previous findings and suggests an obvious conclusion: we cannot generalize conclusions about robust monetary policy using particular models, or in other words, most of the conclusions arrived in this paper as well as in many others (that pretend to be general) are model specific.
Keywords: Hansen-Sargent robust control approach, monetary policy, small open economy, simulation.
JEL classification codes: F41, E52, C61.


Más vistos

Economic complexity of goods and services in Uruguay

Complejidad económica uruguaya en bienes y servicios The objective of this work was to explore the recent history and diagnosis of the complexity of Uruguay's...

The Impact of a Mathematics Computer‐Assisted Learning Platform on Students’ Mathematics Test Scores

Marcelo Perera Diego Aboal   Abstract Since 2013, the Uruguayan educational system has been using an online adaptive learning tool for mathematics: The Mathematics Adaptive Platform (PAM for its...

Knowledge networks for innovation in the forestry sector: Multinational companies in Uruguay

Diego Aboal, FLavia Rovira y Federico Veneri. Abstract In this paper, we analyse the role that inter-agency and inter-business linkages have in the process of technological...

Discovering specific common trends in a large set of disaggregates: statistical procedures, their properties and an empirical application

Author: Guillermo Carlomagno: Central Bank of Chile and Center of Economic Research (CINVE) Antoni Espasa: Department of Statistics and Instituto Flores de Lemus, University Carlos III...

A guide for the evaluation of programs of human capital training for science, technology and innovation

Author: Diego Aboal, Marcelo Perera, Ezequiel Tacsir & Maren Vairo Abstract: We provide a practical guide for impact evaluation of Training and Human Capital programs in Science...

Noticias relacionadas