Trend Growth and Robust Monetary Policy

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Kohei Hasui
Keyword(s):  
Monetary Policy ◽  
Robust Control ◽  
Control Problem ◽  
Productivity Growth ◽  
Model Uncertainty ◽  
Macroeconomic Fluctuations ◽  
Policy Studies ◽  
Trend Growth

AbstractRecent monetary policy studies have shown that the trend productivity growth has non-trivial implications for monetary policy. This paper investigates how trend growth alters the effect of model uncertainty on macroeconomic fluctuations by introducing a robust control problem. We show that an increase in trend growth reduces the effect of the central bank’s model uncertainty and, hence, mitigates the large macroeconomic fluctuations. Moreover, the increase in trend growth contributes to bringing the economy into determinacy regions even if larger model uncertainty exists. These results indicate that trend growth contributes to stabilizing the economy in terms of both variance and determinacy when model uncertainty exists.

scholarly journals ROBUST MONETARY POLICY UNDER MODEL UNCERTAINTY IN A SMALL MODEL OF THE U.S. ECONOMY

2002 ◽  
Vol 6 (1) ◽  
pp. 85-110 ◽  
Author(s):  
Alexei Onatski ◽  
James H. Stock
Keyword(s):  
Monetary Policy ◽  
Robust Control ◽  
Model Uncertainty ◽  
Theoretic Approach ◽  
Bayesian Decision ◽  
Monetary Policies ◽  
Control Techniques ◽  
Decision Theoretic Approach ◽  
Small Model

This paper examines monetary policy in a two-equation macroeconomic model when the policymaker recognizes that the model is an approximation and is uncertain about the quality of that approximation. It is argued that the minimax approach of robust control provides a general and tractable alternative to the conventional Bayesian decision theoretic approach. Robust control techniques are used to construct robust monetary policies. In most (but not all) cases, these robust policies are more aggressive than the optimal policies absent model uncertainty. The specific robust policies depend strongly on the formulation of model uncertainty used, and we make some suggestions about which formulation is most relevant for monetary policy applications.

A NOTE ON ROBUST MONETARY POLICY AND NON-ZERO TREND INFLATION

2018 ◽  
Vol 24 (6) ◽  
pp. 1574-1594 ◽  
Author(s):  
Kohei Hasui
Keyword(s):  
Monetary Policy ◽  
Model Uncertainty ◽  
New Keynesian ◽  
Macroeconomic Fluctuations ◽  
Macroeconomic Variables ◽  
Control Techniques ◽  
Princeton University ◽  
Keynesian Model ◽  
Trend Inflation ◽  
The One

This paper studies how model uncertainty influences economic fluctuation when trend inflation is high. We introduce Hansen and Sargent’s [(2008) Robustness, Princeton University Press] robust control techniques into a New Keynesian model with non-zero trend inflation. We reveal the following three points. First, we find that robust monetary policy responds more aggressively. This aggressiveness increases with trend inflation. Second, as the trend inflation rises, the response of macroeconomic variables is larger under robust policy. Third, stronger robustness tends to lead to indeterminate equilibrium as trend inflation increases. Consequently, the economy might be volatile when trend inflation is high due to robustness from the view of both variance and determinacy. We interpret the results as indicating that the model uncertainty might be the one of the factors causing large macroeconomic fluctuations when trend inflation is high.

scholarly journals ROBUST MONETARY POLICY IN THE NEW KEYNESIAN FRAMEWORK

2008 ◽  
Vol 12 (S1) ◽  
pp. 126-135 ◽  
Author(s):  
KAI LEITEMO ◽  
ULF SÖDERSTRÖM
Keyword(s):  
Monetary Policy ◽  
Robust Control ◽  
Simple Model ◽  
Model Uncertainty ◽  
New Keynesian ◽  
Model Structure ◽  
New Keynesian Model ◽  
Closed Form Solutions ◽  
Control Techniques ◽  
Keynesian Model

We study the effects of model uncertainty in a simple New Keynesian model using robust control techniques. Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analyzing both instrument rules and targeting rules under different timing assumptions. In all cases but one, an increased preference for robustness makes monetary policy respond more aggressively to cost shocks but leaves the response to demand shocks unchanged. As a consequence, inflation is less volatile and output is more volatile than under the nonrobust policy. Under one particular timing assumption, however, increasing the preference for robustness has no effect on the optimal targeting rule (nor on the economy).

MONETARY POLICY AND FINANCIAL INTERMEDIATION IN BASEL III: GLOBAL TRENDS

2019 ◽  
Vol 4 (3) ◽  
pp. 39-47
Author(s):  
Larysa BATIUK
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Federal Reserve ◽  
Global Economy ◽  
Financial Intermediation ◽  
Macroeconomic Fluctuations ◽  
Basel Iii ◽  
Banking Supervision ◽  
Basel Committee ◽  
Real Wealth

Introduction. The article deals with the peculiarities of the transmission mechanism of monetary policy in the implementation conditions of the Basel Committee requirements on Banking Supervision "Basel III". The problem of the mechanism violation of the classical monetary multiplier, the imbalance of the monetary circulation system, the frequency increase of debt defaults and the amplitude of macroeconomic fluctuations in the global economic system are marked as a study result of the effects of the credit mitigation policy conducted by the US Federal Reserve amid the global financial crises of the last decade and changes in the nature of financial intermediation based on the synthesis of asset securitization and structured finance instruments. The purpose of this article is to investigate changes in monetary policy and financial intermediation in the implementation context of the Basel Committee on Banking Supervision Basel III as a source of imbalance in the global economy. Research methodology. The system method, method of scientific abstraction, methods of analysis and synthesis, statistical, comparison, generalization, scientific prediction were used. Results. The article deals with the implications of implementing the Basel Committee on Banking Supervision Basel I and Basel II in the area of monetary policy and financial intermediation; peculiarities of monetary multiplier mechanism operation in modern conditions are revealed; the possible consequences of implementing Basel III requirements for the mechanism of monetary supply formation in the world economy are analysed; the change in the role of gold as monetary metal in central bank foreign exchange reserves and the implications of these changes in terms of price dynamics and the distribution of real wealth in the global economy are examined. Conclusions. It is proposed to consider the requirements of the Basel Committee on Banking Supervision "Basel III" as such, which will exacerbate the volatility of global financial markets, increase the likelihood of increasing the frequency of debt defaults and, given the possibility of using gold as a means of redistribution of real wealth in the global economy, will cause an increase in the amplitude of macroeconomic fluctuations. Keywords: monetary policy; financial intermediation; the central bank; US Federal Reserve; Basel III; bank capital structure, monetary base; money multiplier, correspondent accounts; money supply; monetary gold; global economy.

scholarly journals The Competitiveness in the Light of the Balassa-Samuelson Effect

2016 ◽  
Vol 1 (3) ◽  
pp. 15 ◽  
Author(s):  
Srdjan Amidzic ◽  
Sinisa Kurtes ◽  
Perica Rajcevic
Keyword(s):  
Monetary Policy ◽  
Productivity Growth ◽  
Developing Economies ◽  
International Market ◽  
Currency Board ◽  
Transitional Countries ◽  
Tradable Goods ◽  
High Inflation ◽  
Board System ◽  
High Influence

The paper aims to analyze the influence of the Balassa-Samuleson effect on the competitiveness of Bosniaand Herzegovina. As we know, theBalassa and Samuelson argue that developing economies have an appreciating currency, because they have relatively high inflation due to higher productivity growth in the production of tradable goods. This problem has existed, more or less, in all transitional countries in the EasternEurope, and it was particularly stressed in the countries with a fixed exchange rate. This paper just shows that in Bosnia and Herzegovina, in which monetary policy operates on the principles of "currency board", there is an extremely high influence of theBalassa-Samuelson effect, which leads not only to make a competitive position on the international market worse, but it brings up the question of sustainability of the existing currency board system.

Observer-based robust control for flexible-joint robot manipulators: A state-dependent Riccati equation-based approach

2020 ◽  
Vol 42 (16) ◽  
pp. 3135-3155
Author(s):  
Neda Nasiri ◽  
Ahmad Fakharian ◽  
Mohammad Bagher Menhaj
Keyword(s):  
Robust Control ◽  
Control Problem ◽  
Riccati Equation ◽  
Power Transmission ◽  
Control Method ◽  
Main Idea ◽  
Robotic Systems ◽  
Flexible Joint ◽  
State Dependent ◽  
Highly Nonlinear

In this paper, the robust control problem is tackled by employing the state-dependent Riccati equation (SDRE) for uncertain systems with unmeasurable states subject to mismatched time-varying disturbances. The proposed observer-based robust (OBR) controller is applied to two highly nonlinear, coupled and large robotic systems: namely a manipulator presenting joint flexibility due to deformation of the power transmission elements between the actuator and the robot known as flexible-joint robot (FJR) and also an FJR incorporating geared permanent magnet DC motor dynamics in its dynamic model called electrical flexible-joint robot (EFJR). A novel state-dependent coefficient (SDC) form is introduced for uncertain EFJRs. Rather than coping with the OBR control problem for such complex uncertain robotic systems, the main idea is to solve an equivalent nonlinear optimal control problem where the uncertainty and disturbance bounds are incorporated in the performance index. The stability proof is presented. Solving the complicated robust control problem for FJRs and EFJRs subject to uncertainty and disturbances via a simple and flexible nonlinear optimal approach and no need of state measurement are the main advantages of the proposed control method. Finally, simulation results are included to verify the efficiency and superiority of the control scheme.

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