() and Paul Söderlind
Paolo Giordani: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Paul Söderlind: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Abstract: We summarize some methods useful in formulating and solving Hansen-Sargent robust control problems, and suggest extensions to discretion and simple rules. Matlab, Octave, and Gauss software is provided. We illustrate these extensions with applications to the term structure of interest rates, the time inconsistency of optimal monetary policy, the effects of expectations on the variances of inflation and output, and on whether central banks should make their forecasts public.
21 pages, First version: May 2, 2002. Revised: May 15, 2003. Earlier revisions: May 15, 2003.
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