Revisiting the role of multiplicative uncertainty in a model without inflationary bias

Kobayashi (2003) aims to show that, in a model without inflationary bias, an increase in the degree of multiplicative uncertainty on the transmission mechanism of monetary policy improves social welfare when central bank’s preferences are highly uncertain. We demonstrate that this result applies only to the case in which society is strictly conservative, i.e., when the weight attached to output in the social welfare function is lower than one