Abstract :
Monetarypolicymayplayasubstantialroleinmitigatingtheeffectsoffinancialcrises.
In thispaper,Isupposethattheeconomyoccasionallybutinfrequentlyexperiences
crises,wherefinancialvariablesaffectthebroadereconomy.Ianalyzeoptimal
monetarypolicyundersuchfinancialuncertainty,wherepolicymakersrecognizethe
possibilityofcrises.Optimalmonetarypolicyisaffectedduringthecrisisandinnormal
times, aspolicymakersguardagainstthepossibilityofcrises.Intheestimatedmodel
this effectisquitesmall.Optimalpolicydoeschangesubstantiallyduringacrisis,but
uncertaintyaboutcriseshasrelativelylittleeffect
