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Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
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http://hdl.handle.net/10419/25212
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| Title: | | Optimal policy under model uncertainty: a structural-bayesian estimation approach  |
| Authors: | | Kriwoluzky, Alexander Stoltenberg, Christian |
| Issue Date: | | 2007 |
| Series/Report no.: | | SFB 649 discussion paper 2007,040 |
| Abstract: | | In this paper we propose a novel methodology to analyze optimal policies under model uncertainty in micro-founded macroeconomic models. As an application we assess the relevant sources of uncertainty for the optimal conduct of monetary policy within (parameter uncertainty) and across models (specification uncertainty) using EU 13 data. Parameter uncertainty matters only if the zero bound on interest rates is explicitly taken into account. In any case, optimal monetary policy is highly sensitive with respect to specification uncertainty implying substantial welfare gains of a robust-optimal rule that incorporates this risk. |
| Subjects: | | Optimal monetary policy model uncertainty Bayesian model estimation |
| JEL: | | E32 C51 E52 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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