Robust Monetary Policy Under Uncertainty About the Lower Bound

Robust Monetary Policy Under Uncertainty About the Lower Bound

Central banks face uncertainty about the true location of the effective lower bound (ELB) on nominal interest rates. We model optimal discretionary monetary policy during a liquidity trap when the central bank designs policy that is robust with respect to the location of the ELB. If the central b...

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Bibliographic Details
Published in:MAGKS - Joint Discussion Paper Series in Economics (Band 14-2019)
Main Author: Tillmann, Peter
Format: Article
Language:English
Published: Philipps-Universität Marburg 2019
Subjects:
Wirtschaft
uncer- tainty
optimal monetary policy
discretion
liquidity trap
robust control
Economics
Online Access:PDF Full Text
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Summary:Central banks face uncertainty about the true location of the effective lower bound (ELB) on nominal interest rates. We model optimal discretionary monetary policy during a liquidity trap when the central bank designs policy that is robust with respect to the location of the ELB. If the central bank fears the worst-case location of the ELB, monetary conditions will be more expansionary before the liquidity trap occurs.
Physical Description:15 Pages
ISSN:1867-3678
DOI:10.17192/es2024.0609

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