Reading a central banker's preference: A non parametric regression approach

Cheolbeom Park and Sookyung Park ()
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Sookyung Park: Institute of Economic Research, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul, 08826, Republic of Korea

No 2007, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We examine the role of the Fed's preference in the understanding of inflation rate and unemployment rate evolution using US data over the period of 1960-2017. Facing the evidence of instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.

Keywords: asymmetric preference; inflation; monetary policy; time-varying parameter; unemployment; nonparametric regression (search for similar items in EconPapers)
JEL-codes: E31 E52 E61 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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