This paper studies how a central bank’s preference for robustness against model misspecification affects the design of … analytically for the optimal robust policy rule, and we separately analyse the effects of robustness against misspecification … robustness makes monetary policy respond more aggressively or more cautiously to shocks, depending on the type of shock and the …

rules and targeting rules under different timing assumptions. In all cases but one, an increased preference for robustness … assumption, however, increasing the preference for robustness has no effect on the optimal targeting rule (nor on the economy). …

Modern investment theory takes it for granted that a Security Market Line (SML) is as certain as its "corresponding …, although it does correspond with only one market portfolio risk volatility. This implies that a security' risk premium is … evidence and graphically traces the financial market consequences of this model uncertainty for modern investment theory. First …