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Optimal Monetary Policy under Uncertainty in DSGE Models: A Markov Jump-Linear-Quadratic Approach / Lars E.O. Svensson, Noah Williams.
- Format:
- Book
- Author/Creator:
- Svensson, Lars E.O.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w13892.
- NBER working paper series no. w13892
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Optimal Monetary Policy under Uncertainty in DSGE Models
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2008.
- Summary:
- We study the design of optimal monetary policy under uncertainty in a dynamic stochastic general equilibrium models. We use a Markov jump-linear-quadratic (MJLQ) approach to study policy design, approximating the uncertainty by different discrete modes in a Markov chain, and by taking mode-dependent linear-quadratic approximations of the underlying model. This allows us to apply a powerful methodology with convenient solution algorithms that we have developed. We apply our methods to a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active experimentation affect policy and losses.
- Notes:
- Print version record
- March 2008.
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