Ulf Söderström: Research Department, Sveriges Riksbank, Postal: SE-103 37 Stockholm, Sweden
Abstract: In a simple dynamic macroeconomic model, it is shown that uncertainty about structural parameters does not necessarily lead to more cautious monetary policy, refining the accepted wisdom concerning the effects of parameter uncertainty on optimal policy. In particular, when there is uncertainty about the persistence of inflation, it is optimal for the central bank to respond more aggressively to shocks than if the parameter were known with certainty, since the central bank wants to avoid bad outcomes in the future. Uncertainty about other parameters, in contrast, acts to dampen the policy response.
21 pages, March 8, 1999
Full text files
hastef0308.pdf.zip Full text
hastef0308.pdf Full text
hastef0308.ps.zip PostScript file Full text
hastef0308.ps PostScript file Full text
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2020-02-16 18:55:44.