Inflation Targeting Under Asymmetric Preferences

Francisco Ruge-Murcia

No 2001/161, IMF Working Papers from International Monetary Fund

Abstract: This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate. Specifically, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker's loss function. It is shown that some of the previous results derived under the assumption of symmetry are not robust to this generalization of preferences. Estimates of the central banker's preference parameters for Canada, Sweden, and the United Kingdom are statistically different from the one implied by the commonly-used quadratic loss function.

Keywords: WP; rate of inflation; inflation targets; asymmetric preferences; credibility; natural rate of unemployment; standard error; unemployment process; inflation deviation; Phillips curve; Inflation; Inflation targeting; Unemployment rate; Unemployment; Global (search for similar items in EconPapers)
Pages: 54
Date: 2001-10-01
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Citations: View citations in EconPapers (24)

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Journal Article: Inflation Targeting under Asymmetric Preferences (2003)
Working Paper: Inflation Targeting Under Asymmetric Preferences (2001)
Working Paper: Inflation Targeting Under Asymmetric Preferences (2001)
Working Paper: Inflation Targeting Under Asymmetric Preferences (2001)
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