Robust Estimation and Monetary Policy with Unobserved Structural Change

@inproceedings{Williams2004RobustEA,
  title={Robust Estimation and Monetary Policy with Unobserved Structural Change},
  author={John C. Williams},
  year={2004}
}
This paper considers the joint problem of model estimation and implementation of monetary policy in the face of uncertainty regarding the process of structural change in the economy. We model unobserved structural change through time variation in the natural rates of interest and unemployment. We show that certainty equivalent optimal policies perform poorly when there is model uncertainty about the natural rate processes. We then examine the properties of combined estimation methods and policy… CONTINUE READING

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