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Monetary Policy under Bounded Rationality

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Authors
Seunghoon Na
Advisor
Jae-Young Kim
Major
사회과학대학 경제학부
Issue Date
2012-08
Publisher
Seoul National Unversity
Keywords
CommitmentFeedback ControlLearningMonetary PolicyRobust Control.
Description
학위논문 (석사)-- 서울대학교 대학원 : 경제학부, 2012. 8. Jae-Young Kim.
Abstract
This paper conducts analysis on the effects of monetary policy under bounded rationality
and parameter uncertainty. The model we examined here is New Keynesian
IS-Phillips curve of Christiano, Tranbandt, and Walentin (2011). Two assumptions we
added are that (i) central bank conducts monetary policy while private agents form
forward looking expectations via adaptive learning, and (ii) the central bank has uncertainty
about working capital channel parameter in the Phillips curve. Robust control
method and Bayesian update algorithm are used to model the central banks behavior
to deal with the parameter uncertainty. We examined which induces better outcome
between policy under perfect information, robust policy, and feedback (Bayesian) policy.
Quantitative analysis shows that robust control policy achieves the best performance
among the three policies in discretion whereas it shows the worst performance
when commitment constraint is included. Also, performance of the perfect information
policy and the feedback policy with commitment outperform that of discretionary
policies.
Language
English
URI
https://hdl.handle.net/10371/134557
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College of Social Sciences (사회과학대학)Dept. of Economics (경제학부)Theses (Master's Degree_경제학부)
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