期刊
JOURNAL OF ECONOMIC DYNAMICS & CONTROL
卷 30, 期 9-10, 页码 1527-1567出版社
ELSEVIER
DOI: 10.1016/j.jedc.2005.10.013
关键词
optimal monetary policy; regime switching; uncertain probabilities
类别
This paper examines the trade-offs that a central bank faces when the exchange rate can experience sustained deviations from fundamentals and occasionally collapse. The economy is modelled as switching randomly between different regimes according to time-invariant transition probabilities. We compute both the optimal regime-switching control rule for this economy and optimised linear Taylor rules, in the two cases where the transition probabilities are known with certainty and where they are uncertain. The simple algorithms used in the computation are also of independent interest as tools for the study of monetary policy under general forms of (asymmetric) additive and multiplicative uncertainty. An interesting finding is that policies based on robust (minmax) values of the transition probabilities are usually more conservative. (c) 2006 Bank of England. Published by Elsevier B.V. All rights reserved.
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