A Prudent Central Banker

Francisco Ruge-Murcia

IMF Staff Papers, 2002, vol. 49, issue 3, 7

Abstract: This paper studies the role of prudence in modern central banking. To that end, it relaxes the usual assumption of quadratic preferences and adopts instead an asymmetric preference specification whereby positive deviations from a target can be weighted more, or less, severely than negative deviations. It is shown that prudence with respect to inflation (unemployment) reduces (increases) equilibrium inflation. The overall effect depends on the relative magnitude of the preference parameters and the conditional variances of inflation and unemployment. The implications of the model are examined using cross-section data from OECD countries. . Copyright 2002, International Monetary Fund

JEL-codes: E58 E61 (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.imf.org/External/Pubs/FT/staffp/2002/03/pdf/ruge.pdf main text (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: A Prudent Central Banker (2001)
Working Paper: A Prudent Central Banker (2001)
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:pal:imfstp:v:49:y:2002:i:3:p:7

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

Access Statistics for this article

More articles in IMF Staff Papers from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().