The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences

Journal of Economic Dynamics and Control

Volumn 31, Issue 1, 2007, Pages 305-324

  Surico, Paolo ^a,b  

^a BANK OF ENGLAND   (United Kingdom)

^b UNIVERSITY OF BARI   (Italy)

Author keywords

Asymmetric objective; Average inflation bias; Nonlinear Euler equation

Indexed keywords

EID: 33751332493     PISSN: 01651889     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jedc.2005.11.001     Document Type: Article

References (54)

1. Barro R.J., and Gordon D. A positive theory of monetary policy in a natural rate model. Journal of Political Economy 91 (1983) 589-610
2. Bernanke B., and Mihov I. Measuring monetary policy. Quarterly Journal of Economics 63 (1998) 869-902
3. Blinder A. Distinguished lecture on economics and government: what central bankers could learn from academics and vice versa. Journal of Economic Perspective 11 (1997) 3-19
4. Blinder A. Central Banking in Theory and Practice (1998), MIT Press, Cambridge, MA
5. Castelnuovo, E., 2003. Squeezing the interest rate smoothing weight with an hybrid expectations model. FEEM Working Paper No. 06.
6. Chadha, J.S., Schellekens, P., 1999. Monetary policy loss functions: two cheers for the quadratic. DAE Working Paper 99/20.
7. Clarida R., Galí J., and Gertler M. The science of monetary policy: a new Keynesian perspective. Journal of Economic Literature 37 (1999) 1661-1707
8. Clarida R., Galí J., and Gertler M. Monetary policy rules and macroeconomic stability: evidence and some theory. Quarterly Journal of Economics 115 (2000) 147-180
9. Cukierman A. Are contemporary central banks transparent about economic models and objectives and what difference does it make?. Federal Reserve Bank of St. Louis Review 84 (2002) 15-45
10. Cukierman A., and Gerlach S. The inflation bias revisited: theory and some international evidence. The Manchester School 71 (2003) 541-565
11. Cukierman, A., Muscatelli, A., 2003. Do central banks have precautionary demands for expansions and for price stability? theory and evidence. Mimeo, Tel-Aviv University.
12. De Long J.B. America's peacetime inflation: the 1970s. In: Romer C.D., and Romer D.H. (Eds). Reducing Inflation: Motivation and Strategy (1997), Chicago University Press, Chicago
13. van Dijk D., Teräsvirta T., and Franses P.H. Smooth transition autoregressive models-a survey of recent developments. Econometric Reviews 21 (2002) 1-47
14. Dolado, J.J., María-Dolores, R., Ruge-Murcia, F.J., 2004. Nonlinear Monetary Policy Rules: Some New Evidence for the US, Studies in Nonlinear Dynamics and Econometrics 8 (Article 2).
15. Dolado J.J., María-Dolores R., and Naveira M. Are monetary-policy reaction functions asymmetric? the role of nonlinearity in the Phillips curve. European Economic Review 49 (2005) 485-503
16. Duisenberg, W.F., 2001. Introductory Statement to the Press Conference on 8 November.
17. Ehrlichman J. Witness to Power: The Nixon Years (1982), Simon and Schuster, New York
18. Erosa A., and Ventura G. On inflation as a regressive consumption tax. Journal of Monetary Economics 49 (2002) 761-795
19. Favero C.A., and Rovelli R. Macroeconomic stability and the preferences of the Fed: a formal analysis, 1961-1998. Journal of Money Credit and Banking 35 (2003) 545-556
20. Galí J., and Gertler M. Inflation dynamics: a structural econometric analysis. Journal of Monetary Economics 44 (1999) 195-222
21. Galí, J., Gertler, M., Lopez-Salido, J.D., 2003a. Markups, gaps, and the welfare costs of business fluctuations. Mimeo, Universitat Pompeu Fabra.
22. Galí, J., Gertler, M., Lopez-Salido, J.D., 2003b. Robustness of the estimates of the hybrid New Keynesian Phillips curve. Mimeo, Universitat Pompeu Fabra.
23. Greider W. Secrets of the Temple: How the Federal Reserve Runs the Country (1987), Simon & Schuster, New York
24. Hansen L.P. Large sample properties of generalized method of moments estimators. Econometrica 50 (1982) 1029-1054
25. Ireland P. Sticky-price models of the business cycle: specification and stability. Journal of Monetary Economics 47 (2001) 3-18
26. Ireland, P., 2005. Changes in the Federal Reserve's inflation target: causes and consequences. Mimeo, Boston College.
27. Kahneman D., and Tversky A. Prospect theory: an analysis of decision under risk. Econometrica 47 (1979) 263-292
28. Kimball M.S. Precautionary saving in the small and the large. Econometrica 58 (1990) 53-73
29. Kuha J., and Temple J. Covariate measurement error in quadratic regression. International Statistical Review 71 (2003) 131-150
30. Luukkonen R., Saikkonen P., and Teräsvirta T. Testing linearity against smooth transition autoregressive models. Biometrika 75 (1988) 491-499
31. Nelson, E., 2005. The Great Inflation of the Seventies: What Really Happened?, Advances in Macroeconomics 5, Article 3.
32. Martin, C., Milas, C., 2004. Modelling monetary policy: inflation targeting in practice. Economica 71, 209-221.
33. Meyer L.H., Swanson E.T., and Wieland V. NAIRU uncertainty and nonlinear policy rules. American Economic Review 91 (2001) 226-231
34. Nobay R., and Peel D. Optimal discretionary monetary policy in a model of asymmetric Central Bank preferences. Economic Journal 113 (2003) 657-665
35. Orphanides, A., 2004. Monetary policy rules, macroeconomic stability and inflation: a view from the trenches. Journal of Money, Credit and Banking 36, 151-175.
36. Persson T., and Tabellini G. Political economics and macroeconomic policy. In: Taylor J.B., and Woodford M. (Eds). Handbook of Macroeconomics vol. 1 (1999), North-Holland, Amsterdam
37. Romer, C., Romer, D., 2003. Choosing the Federal Reserve Chair: lessons from history. Mimeo, University of California, Berkeley.
38. Rotemberg J.J., and Woodford M. Interest rate rules in an estimated sticky price model. In: Taylor J.B. (Ed). Monetary Policy Rules (1999), Chicago University Press, Chicago
39. Rudebusch G.D. Term structure evidence on interest rate smoothing and monetary policy inertia. Journal of Monetary Economics 49 (2002) 1161-1187
40. Ruge-Murcia F.J. Inflation targeting under asymmetric preferences. Journal of Money, Credit and Banking 35 (2003) 763-785
41. Sack B., and Wieland V. Interest-rate smoothing and optimal monetary policy: a review of recent empirical evidence. Journal of Economics and Business 52 (2000) 205-228
42. Schaling E. The non-linear Phillips curve and inflation forecast targeting. Journal of Money, Credit & Banking 36 (2004) 361-386
43. Smets, F., Wouters, R., 2003a. Shocks and frictions in US business cycle: a Bayesian DSGE approach. Mimeo, European Central Bank.
44. Smets, F., Wouters, R., 2003b. Output gaps: theory versus practice. Mimeo, European Central Bank.
45. Stock, J., Yogo, M., 2003. Testing for weak instruments in linear IV regression. Mimeo, Harvard University.
46. Surico, P., 2003. Measuring the time-inconsistency of U.S. monetary policy. European Central Bank Working Paper No. 291.
47. Surico, P., 2004. Inflation targeting and nonlinear policy rules: the case of asymmetric preferences. CESifo wp No. 1280.
48. Svensson L.E.O. Inflation targeting as a monetary policy rule. Journal of Monetary Economics 43 (1999) 607-654
49. Taylor J.B. Discretion versus policy rules in practice. Carnegie - Rochester Conference Series on Public Policy 39 (1993) 195-214
50. Varian H. A Bayesian approach to real estate assessment. In: Feinberg S.E., and Zellner A. (Eds). Studies in Bayesian Economics in Honour of L.J. Savage (1974), North-Holland, Amsterdam
51. Woodford, M., 1999. Optimal monetary policy inertia, NBER Working Paper No. 7261.
52. Woodford, M., 2003. Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press, Princeton, NJ.
53. Yun T. Nominal price rigidity, money supply endogeneity, and business cycles. Journal of Monetary Economics 37 (1996) 345-370
54. Zellner A. Bayesian estimation and prediction using asymmetric loss functions. Journal of the American Statistical Association 81 (1986) 446-451