Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes?

Matthew Doyle and Barry L. Falk

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Recent theoretical work shows that changes in the volatility of inflation and/or unemployment affect equilibrium inflation outcomes when the central banker's loss function is asymmetric. We show that previous evidence offered in support of the proposition that the volatility of unemployment helps explain inflation outcomes suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but the data is not strongly supportive of the view that asymmetric central bank preferences are an important driver of inflation.

Keywords: inflation; monetary policy; asymmetric loss (search for similar items in EconPapers)
JEL-codes: E50 E61 (search for similar items in EconPapers)
Date: 2006-02-20
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Do asymmetric central bank preferences help explain observed inflation outcomes? (2010)
Working Paper: Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:12501

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