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Evaluating monetary policy rules under fundamental uncertainty: An info-gap approach
- with Yakov Ben-Haim and Jan Willem van den End
- Jun 1, 2018
- 1 min read
Highlights
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We use info-gap theory to identify monetary policy rules that are robust to fundamental uncertainty.
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The standard Taylor rule shows the most favourable trade-off between robustness and performance.
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Taylor rules that include a credit spread or a debt-to-GDP ratio lead to less robust policy decisions.
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Monetary policy should refrain from aiming at financial stability given the uncertain effects.
See full paper here.
