We formulate infinite dimensional stochastic robust optimal control problems, motivated by applications arising in interconnected economic systems, or spatially extended economies. We study in detail linear quadratic problems and nonlinear problems. We derive optimal robust controls and identify...

This paper tries to study the robust monetary policy in an uncertain economic environment. More precisely, our idea is to know how to conduct monetary policy in the case that the central bank does not correctly perceive the true model. Our approach is to estimate a dynamic macroeconomic model...

In this paper we examine implications of model uncertainty due to robustness (RB) for consumption and saving and the market price of uncertainty under limited information-processing capacity (rational inattention or RI). We first solve the robust permanent income models with inattentive...

This paper studies the design of optimal time-consistent monetary policy in an economy where the planner trusts its own model, while a representative household uses a set of alternative probability distributions governing the evolution of the exogenous state of the economy. In such environments,...

This paper studies the design of optimal time-consistent monetary policy in an economy where the planner trusts its own model, while a representative household uses a set of alternative probability distributions governing the evolution of the exogenous state of the economy. In such environments,...