Monetary Policy, Doubts and Asset Prices
Luiss Guido Carli; EIEF Einaudi Institute for Economics and Finance
New Keynesian DSGE model with doubts and ambiguity aversion (robust control framework of Hansen-Sargent), capital accumulation with adjustment costs, Calvo price stickiness, and monopolistic competition. Households distrust the reference probab
intermediate firms: monopolistic competition with Calvo pricing; final goods: perfect competition with Dixit-Stiglitz aggregation
Table 1 p.17
Optimal policy under rational expectations (no model uncertainty, psi=1)