Robustly optimal monetary policy in a new Keynesian model with housing

We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. With rational private sector expectations about prices and inflation, can be characterized by standard ‘target criterion’ that refers to inflation the output gap, without making reference prices. When policymaker is concerned potential departures of from ones seeks robust against such possible departures, then target criterion must also depend on For empirically realistic cases, central bank should ‘lean against’ prices, i.e., following unexpected price increases (decreases), adopt stance projected undershoot (overshoot) its normal targets gap. Robustly does not require distinguishes between ‘fundamental’ ‘non-fundamental’ movements in