Download or read book Robust Monetary Policy Under Time-Varying Model Uncertainty written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces time-varying uncertainty into a simple New Keynesian model where the central bank seeks a decision rule that is robust to model misspecification. The paper finds that variation in the central bankXs concern for robustness leads to time-varying, nonnormally distributed impulse responses of output gap, inflation, and the interest rate. These predictions are confirmed by the impulse responses estimated from US quarterly data from 1954 to 2015. Quantitatively, the estimates confirm previous findings that a robust decision maker responds more aggressively than the central bank does empirically.