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ASYMMETRIC PREFERENCES FOR INTEREST RATE VARIABILITY AND NON‐LINEAR MONETARY POLICY INERTIA
Author(s) -
Florio Anna
Publication year - 2009
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2009.00503.x
Subject(s) - economics , disinflation , interest rate , monetary policy , inertia , smoothing , econometrics , monetary economics , mathematics , statistics , physics , classical mechanics
Introducing in a central bank loss function asymmetric preferences for interest rate stabilization together with a (symmetric) smoothing goal could lead to asymmetric interest rate smoothing. An empirical analysis supports this theoretical result and finds for the disinflation (Volcker) period a more cautious adjustment of interest rates downwards than upwards, and for the ‘price stability’ (Greenspan) period a more inertial behaviour in the opposite direction.