Robust Control in a Sticky Information Economy

34 Pages Posted: 7 Nov 2008

See all articles by Francesco Giuli

Francesco Giuli

University of Rome III - Department of Economics

Date Written: April 1, 2007

Abstract

This paper analyzes the behavior of a central bank under strong (Knightian) uncertainty when the short run trade-off between output and inflation is represented by the Sticky Information Phillips Curve recently proposed by Mankiw and Reis (2002). By solving the robust control problem analytically, this paper elucidates the economic mechanisms at play in a sticky information economy and shows how and why the robust monetary policy in this economy differs from the optimal one identified by Ball, Mankiw and Reis (2005).

Keywords: Robust control, sticky information, minmax policies

JEL Classification: D81, E52, E58

Suggested Citation

Giuli, Francesco, Robust Control in a Sticky Information Economy (April 1, 2007). Available at SSRN: https://ssrn.com/abstract=1296459 or http://dx.doi.org/10.2139/ssrn.1296459

Francesco Giuli (Contact Author)

University of Rome III - Department of Economics ( email )

via Ostiense, 139
Rome, 00154
Italy

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