Working Paper

Robust control with commitment: a modification to Hansen-Sargent

Abstract: This paper studies robust control problems when policy is set with commitment. One contribution of the paper is to articulate an approximating equilibrium that differs importantly from that developed in Hansen and Sargent (2003). The paper illustrates how the proposed approximating equilibrium differs from Hansen-Sargent in the context of two New Keynesian business cycle models. A further contribution of the paper is to show that once misspecification is acknowledged commitment is no longer necessarily superior to discretion.

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Working Paper Series

Publication Date: 2005

Number: 2005-20