
doi: 10.2298/pan1202185k
A great number of recent researches have found importance of country specific shocks for optimal monetary policy construction in the context of a currency union. This however has been almost completely overlooked by the analysis of optimal monetary policy under model uncertainty. The main purpose of our work is to fill this gap. By using a model of a two-country currency union with sticky prices, we have derived robust monetary policy that works reasonably well even in the worst case of model perturbations. We find some anti-attenuation effect of uncertainty, and show that the central bank?s optimal reaction to economic shocks becomes more aggressive with an increase in the extent of misspecification.
HB1-3840, Currency union, Model uncertainty, Robust monetary policy, Economic theory. Demography, Model uncertainty, Robust monetary policy, Currency union, jel: jel:E52, jel: jel:E58
HB1-3840, Currency union, Model uncertainty, Robust monetary policy, Economic theory. Demography, Model uncertainty, Robust monetary policy, Currency union, jel: jel:E52, jel: jel:E58
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 0 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Average | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Average | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Average |
