TY  - UNPD
A1  - Küster, Keith
A1  - Wieland, Volker
T1  - Insurance policies for monetary policy in the Euro area
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,13
N2  - In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion.These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. JEL Klassifikation: E52, E58, E61.
T3  - CFS working paper series - 2005, 13 
KW  - Model Uncertainty
KW  - Robustness
KW  - Monetary Policy Rules
KW  - Minimax
KW  - Euro Area
KW  - Europäische Union
KW  - Währungsunion
KW  - Geldpolitik
Y1  - 2005
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4402
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-10892
IS  - April 2005
ER  -