The Macroeconomic Loss Function: A Critical Note

Thomas Mayer

No 5, Working Papers from University of California, Davis, Department of Economics

Abstract: The standard loss function gives the same weight to positive and negative deviations from the output and inflation targets. This short note criticizes this symmetry assumption. If the period covered is long enough output growth in excess of the target, and often also inflation rates that are below target, should be counted as gains instead of losses.

Keywords: Loss functions; macro policy evaluation (search for similar items in EconPapers)
JEL-codes: E37 E50 E61 (search for similar items in EconPapers)
Pages: 6
Date: 2003-01-15
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Citations: View citations in EconPapers (1)

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Working Paper: The Macroeconomic Loss Function: A Critical Note (2002)
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