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- W1529582023 abstract "In this paper we formalize the uncertainty about the persistence of cost-push shocks using an open economy optimal control model with Markov regime-switching and robust control. The latter is used in only one of the regimes producing relatively more persistent cost-push shocks in that regime. Conditional on being in the regime with relatively less persistence, we obtain two main results: a) underestimating the probability of switching to the regime with relatively more persistent cost-push shocks causes higher welfare losses than its overestimation; and b) the welfare losses associated with either underestimation or overestimation of such probability increase with the size of the penalty on inflation deviations from its target." @default.
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- W1529582023 date "2007-03-01" @default.
- W1529582023 modified "2023-09-27" @default.
- W1529582023 title "Uncertainty about the Persistence of Cost-Push Shocks and the Optimal Reaction of the Monetary Authority *" @default.
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