Title : Robust Control and Monetary Policy Delegation
Author(s) : Giuseppe Diana, Moise Sidiropoulos
Abstract : This paper adapts in a simple static context the Rogoff's (1985) analysis of monetary policy delegation to a conservative central banker to the robust control framework. In this framework, uncertainty means that policymakers are unsure about their model, in the sense that there is a group of approximate models that they also consider as possibly true, and their objective is to choose a rule that will work under a range of di¤erent model specifications. We find that robustness reveals the emergence of a precautionary behaviour in the case of unstructured model uncertainty, reducing thus government's willingness to delegate monetary policy to a conservative central banker.
Key-words : Robust control, Monetary policy delegation, Central bank conservativeness.
JEL Classification : E52, E58