Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve

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dc.contributor.author Dolado, Juan José
dc.contributor.author María-Dolores, Ramón
dc.contributor.author Naveira, Manuel
dc.date.accessioned 2009-01-29T13:09:20Z
dc.date.available 2009-01-29T13:09:20Z
dc.date.issued 2005
dc.identifier.bibliographicCitation European Economic Review, 2005, 49, 2, p. 485-503
dc.identifier.issn 0014-2921
dc.identifier.uri http://hdl.handle.net/10016/3205
dc.description.abstract This paper investigates the implications of a nonlinear Phillips curve for the derivation of optimal monetary policy rules. Combined with a quadratic loss function, the optimal policy is also nonlinear, with the policy-maker increasing interest rates by a larger amount when inflation or output are above target than the amount it will reduce them when they are below target. Specifically, the main prediction of our model is that such a source of nonlinearity leads to the inclusion of the interaction between expected inflation and the output gap in an otherwise linear Taylor rule. We find empirical support for this type of asymmetries in the interest rate-setting behaviour of four European central banks but none for the US Fed.
dc.format.mimetype text/plain
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.rights © Elsevier
dc.subject.other Taylor rules
dc.subject.other Nonlinearities
dc.subject.other Phillips curve
dc.title Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve
dc.type article
dc.type.review PeerReviewed
dc.description.status Publicado
dc.relation.publisherversion http://www.elsevier.com/locate/eer
dc.relation.publisherversion http://dx.doi.org/10.1016/S0014-2921(03)00032-1
dc.subject.jel E52
dc.subject.jel E58
dc.subject.eciencia Economía
dc.identifier.doi 10.1016/S0014-2921(03)00032-1
dc.rights.accessRights openAccess
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