Evaluating monetary policy rules under fundamental uncertainty: An info-gap approach
Highlights
•
We use info-gap theory to identify monetary policy rules that are robust to fundamental uncertainty.
•
The standard Taylor rule shows the most favourable trade-off between robustness and performance.
•
Taylor rules that include a credit spread or a debt-to-GDP ratio lead to less robust policy decisions.
•
Monetary policy should refrain from aiming at financial stability given the uncertain effects.
See full paper here.
