Output-based controllers are known to be fragile with respect to model uncertainties. The standard H∞-control theory provides a general approach to robust controller design based on the solution of the H∞-Riccati equations. In view of stabilizing incompressible flows in simulations, two...

We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model a la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond...

We study the impact of adaptive learning for the design of a robust monetary policy using a small open-economy New Keynesian model. We find that slightly departing from rational expectations substantially changes the way the central bank deals with model misspecification. Learning induces an...