Title : The limits to robust monetary policy in a small open economy with learning agents
Author(s) : Marine Charlotte André, Meixing Dai
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.
Key-words : Robust control, model uncertainty, adaptive learning, optimal monetary policy, small open economy
JEL Classification : C62, D83, D84, E52, E58.