ASYMMETRIC PREFERENCES FOR INTEREST RATE VARIABILITY AND NON‐LINEAR MONETARY POLICY INERTIA

Anna Florio

Scottish Journal of Political Economy, 2009, vol. 56, issue 5, 685-704

Abstract: Introducing in a central bank loss function asymmetric preferences for interest rate stabilization together with a (symmetric) smoothing goal could lead to asymmetric interest rate smoothing. An empirical analysis supports this theoretical result and finds for the disinflation (Volcker) period a more cautious adjustment of interest rates downwards than upwards, and for the ‘price stability’ (Greenspan) period a more inertial behaviour in the opposite direction.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:56:y:2009:i:5:p:685-704

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