Recent monetary policy analyses show the profound implications of progressive taxation for monetary policy. This paper investigates how progressive taxation on labor income alters the effect of model uncertainty by introducing robust control. We analyze the effect by deriving closed form...

Recent monetary policy studies have shown that the trend productivity growth has non-trivial implications for monetary policy. This paper investigates how trend growth alters the effect of model uncertainty on macroeconomic fluctuations by introducing a robust control problem. We show that an...

This paper studies how model uncertainty influences economic fluctuation when trend inflation is high. We introduce Hansen and Sargent’s (2008) robust control techniques into a New Keynesian model with non-zero trend inflation. We reveal the following three points. First, we find that robust...