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The usual robust control framework in discrete time: Some interesting results

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  • Marco Paolo Tucci

Abstract

By applying robust control the decision maker wants to make good decisions when his model is only a good approximation of the true one. Such decisions are said to be robust to model misspecification. In this paper it is shown that the application of the usual robust control framework in discrete time problems is associated with some interesting, if not unexpected, results. Results that have far reaching consequences when robust control is applied sequentially, say every year in fiscal policy or every quarter (month) in monetary policy. This is true when unstructured uncertainty à la Hansen and Sargent is used, both in the case of a “probabilistically sophisticated” and a non-“probabilistically sophisticated” decision maker, or when uncertainty is related to unknown structural parameters of the model.

Suggested Citation

  • Marco Paolo Tucci, 2019. "The usual robust control framework in discrete time: Some interesting results," Department of Economics University of Siena 815, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:815
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    More about this item

    Keywords

    Linear quadratic tracking problem; optimal control; robust control; time-varying parameters;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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