701 - Robust versus Optimal Rules in Monetary Policy: A Note

Wetenschappelijke publicatie
Date 1 October 2002

We provide a framework for analysing the choice between optimal and robust rules in the presence of paradigm uncertainty in monetary policy. We thus provide two issues: first, we discuss the conditions of uncertainty that render a robust rule a preferable substitute to optimal rules and second, we show how the degree of risk aversion increases the desirability of robust rules. Keywords: Model Uncertainty, Monetaru Policy, Optimal Policy Rules JEL codes: E52, E58, C70