Related papers: Stability and Identification with Optimal Macropru…
There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King (1997), Clarida et al. (1999),…
A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…
We study the problem of choosing optimal policy rules in uncertain environments using models that may be incomplete and/or partially identified. We consider a policymaker who wishes to choose a policy to maximize a particular counterfactual…
The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Control systems involving unknown parameters appear a natural framework for applications in which the model design has to take into account various uncertainties. In these circumstances the performance criterion can be given in terms of an…
This paper derives two stabilizability theorems for a basic class of discrete-time nonlinear systems with multiple unknown parameters. First, we claim that a discrete-time multi-parameter system is stabilizable if its nonlinear growth rate…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
A theoretical model of systemic-risk propagation of financial market is analyzed for stability. The state equation is an unsteady diffusion equation with a nonlinear logistic growth term, where the diffusion process captures the spread of…
Norms of Persistent Homology introduced in topological data analysis are seen as indicators of system instability, analogous to the changing predictability that is captured in financial market uncertainty indexes. This paper demonstrates…
This article presents a constrained policy optimization approach for the optimal control of systems under nonstationary uncertainties. We introduce an assumption that we call Markov embeddability that allows us to cast the stochastic…
This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…
This paper investigates a type of instability that is linked to the greedy policy improvement in approximated reinforcement learning. We show empirically that non-deterministic policy improvement can stabilize methods like LSPI by…
The stability of solutions to evolution equations with respect to small stochastic perturbations is considered. The stability of a stochastic dynamical system is characterized by the local stability index. The limit of this index with…
Nonlinear control systems with partial information to the decision maker are prevalent in a variety of applications. As a step toward studying such nonlinear systems, this work explores reinforcement learning methods for finding the optimal…
We derive asymptotically optimal statistical decision rules for discrete choice problems when payoffs depend on a partially-identified parameter $\theta$ and the decision maker can use a point-identified parameter $\mu$ to deduce…
Tracking the build-up of financial vulnerabilities is a key component of financial stability policy. Due to the complexity of the financial system, this task is daunting, and there have been several proposals on how to manage this goal. One…
We present a method for determining optimal modes of operation for autonomously oscillating systems with uncertain parameters. In a typical application of the method, a nonlinear dynamical system is optimized with respect to an economic…
Identification of the parameters of stable linear dynamical systems is a well-studied problem in the literature, both in the low and high-dimensional settings. However, there are hardly any results for the unstable case, especially…
Minimizing volatility and adjustment costs is of central importance in many economic environments, yet it is often complicated by evolving feasibility constraints. We study a decision maker who repeatedly selects an action from a…