A Continuous Minimax Problem and its Application to Inflation Targeting

  • Berç Rustem
  • Volker Wieland
  • Stanislav Zakovic
Part of the Advances in Computational Management Science book series (AICM, volume 4)

Abstract

In this paper we apply an algorithm for continuous minimax problems to a simple macroeconomic model with an inflation-targeting central bank. The algorithm uses a quasi—Newton direction conditional on appropriate maximizers, where the direction involves a quadratic subproblem to compute the minimum norm subgradient. The model and parameter estimates are taken from Orphanides and Wieland [7] who have used it to analyze inflation zone versus point targeting. In this paper, however, the approach to monetary policy design is different as we minimize the worst—case with respect to inflation and economic activity. We compare the resulting policy recommendations under worst-case scenarios with those of the H approach, which has recently been applied to monetary policy by several authors.

Keywords

Interest Rate Monetary Policy Uncertain Variable Nominal Interest Rate Phillips Curve 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Berç Rustem
  • Volker Wieland
  • Stanislav Zakovic

There are no affiliations available

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