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dynamical estimate of the market price of risk and updates her stochastic utility in accordance with the so-perceived elapsed …
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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,...
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popular Epstein-Zin-Weil recursive preferences as special cases. Besides providing a model uncertainty rationale to these risk …-Zin-Weil preferences yield comparable market prices of risk for given detection error probabilities. …
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