We provide a framework for analysing the choice between optimal and robust rules in the presence of paradigm uncertainty in monetary policy. We thus provide for two issues: …rst, we discuss the conditions of uncertainty that render a robust rule a preferable substitute to optimal rules and...

Output gaps for 11 EU countries, the US and Japan are constructed based on measures of potential output derived from a CES production function. This production function accommodates differences in substitution elasticities between countries. Indeed, the empirical evidence shows that real wage...

In a dynamic framework banks compete for customers by setting lending conditions for the loans they supply, taking into account the capital adequacy requirements posed by the regulator. By easing its lend- ing conditions a bank faces a tradeoff between attracting more demand for loans, thus...