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| Author: | Tillman, P. |
| Title: | Robust monetary policy with the cost channel |
| Journal: | Economica
2009 : JUL, VOL. 76:303, p. 486-504 |
| Index terms: | monetary policy models uncertainty interest rates |
| Language: | eng |
| Abstract: | This paper examines whether the introduction of a cost channel of monetary transmission with empirically supported presence changes the impact of model uncertainty on interest rate (hereafter as: i-r.) setting. An analytical solution can be facilitated by the model. It is found that the presence of the cost channel dampens the effect of model uncertainty on i-r. setting and can offset the activist policy stance. A richer model allowing for persistent supply and demand shocks confirms these findings. |
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