Economics at your fingertips  

Expected Social Welfare under a Convex Philips Curve and Asymmetric Policy Preferences

Demosthenes Tambakis ()

Journal of Money, Credit and Banking, 2002, vol. 34, issue 2, 434-49

Abstract: This paper evaluates the expected social welfare implications of monetary policy with a convex Phillips curve under a symmetric loss function and an asymmetric loss function corresponding to the "opportunistic approach" to disinflation. The convex-asymmetric specification yields an inaction range of inflation shocks for which the optimal monetary policy setting does not adjust. For parameter estimates relevant to the U.S., numerical simulations show that the symmetric loss function dominates the asymmetric alternative in expected social welfare terms. Asymmetric policy preferences enhance social welfare only under extreme parameter values. This result is robust to sensitivity analysis with respect to inflation variability and the degrees of Phillips curve convexity and preference asymmetry, thereby supporting arguments for a tough anti-inflationary stance by the Federal Reserve regardless of the "true" social loss function.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().

Page updated 2020-11-11
Handle: RePEc:mcb:jmoncb:v:34:y:2002:i:2:p:434-49