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Optimal monetary policy delegation in a small-open new Keynesian model with robust control

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  • Ida, Daisuke
  • Okano, Mitsuhiro

Abstract

This study examines the optimal monetary policy delegation in a small-open new Keynesian model with model uncertainty. We show that under the worst-case equilibrium, nominal income growth targeting outperforms the considered alternative delegation regimes. We find that the response of the nominal exchange rate depends on the specifications of the delegated targeting regimes. Finally, introducing endogenous inflation persistence into the benchmark model does not affect our main findings.

Suggested Citation

  • Ida, Daisuke & Okano, Mitsuhiro, 2023. "Optimal monetary policy delegation in a small-open new Keynesian model with robust control," Economic Modelling, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322003911
    DOI: 10.1016/j.econmod.2022.106154
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    More about this item

    Keywords

    Optimal monetary policy; Targeting regime; Robust control; Small-open economy; New Keynesian model;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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