Nonlinear Monetary Policy Rules: Some New Evidence for the U.S

Juan J. Dolado, Ramón Maria-Dolores and Francisco J. Ruge-Murcia ()

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: This paper derives optimal monetary policy rules in setups where certainty equivalence does not hold because either central bank preferences are not quadratic, and/or the aggregate supply relation is nonlinear. Analytical results show that these features lead to sign and size asymmetries, and nonlinearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a nonlinear policy rule after 1983, but not before 1979. This finding is consistent with the view that the Fed's inflation preferences during the Volcker-Greenspan regime differ considerably from the ones during the Burns-Miller regime.

Keywords: Nonlinear Taylor rules; inflation targets; asymmetric preferences; nonlinear Phillips curve; monetary policy (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: Written 2003
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Related works:
Working Paper: Non-Linear Monetary Policy Rules: Some New Evidence for the US (2002)
Working Paper: Nonlinear Monetary Policy Rules: Some New Evidence for the U.S (2003)
Working Paper: NONLINEAR MONETARY POLICY RULES: SOME NEW EVIDENCE FOR THE US (2002)
Journal Article: Nonlinear Monetary Policy Rules: Some New Evidence for the U.S (2004)
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