Optimal Monetary Policy with a Convex Phillips Curve

Demosthenes Tambakis ()

The B.E. Journal of Macroeconomics, 2009, vol. 9, issue 1, 25

Abstract: This paper shows that convexity of the short-run Phillips curve is a source of positive inflation bias even when policymakers target the natural unemployment rate, that is when they operate with prudent discretion, and their loss function is symmetric. Optimal monetary policy also induces positive co-movement between average inflation, average unemployment and inflation variability---suggesting a new motive for inflation stabilization policy---and positively skewed unemployment distributions. The reduced form model is applied to the post-disinflation period (1986-2006) in developed countries and its properties are illustrated numerically for the United States.

Keywords: monetary policy; inflation bias; inflation variability; prudent discretion (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.2202/1935-1690.1649 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Optimal Monetary Policy with a Convex Phillips Curve (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:9:y:2009:i:1:n:22

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html

DOI: 10.2202/1935-1690.1649

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().