Financial stability under model uncertainty
Date
2018
Authors
Kantur, Z.
Özcan, G.
Editor(s)
Advisor
Supervisor
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Co-Supervisor
Instructor
Source Title
Economics Letters
Print ISSN
0165-1765
Electronic ISSN
1873-7374
Publisher
Elsevier B.V.
Volume
173
Issue
Pages
65 - 68
Language
English
Type
Journal Title
Journal ISSN
Volume Title
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Abstract
This paper studies how asset price model misspecification affects the conduct of monetary policy under commitment in a New Keynesian model using robust control techniques. We find that monetary policy reacts aggressively to both asset price and inflation shocks to guard herself against worst-case outcome.