Nonlinear Monetary Policy Rules: Some New Evidence for the U.S.
Open Access
- 16 September 2004
- journal article
- Published by Walter de Gruyter GmbH in Studies in Nonlinear Dynamics and Econometrics
- Vol. 8 (3)
- https://doi.org/10.2202/1558-3708.1155
Abstract
This paper derives optimal monetary policy rules in setups where certainty equivalence does not hold because either central bank preferences are not quadratic, and/or the aggregate supply relation is nonlinear. Analytical results show that these features lead to sign and size asymmetries, and nonlinearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a nonlinear policy rule after 1983, but not before 1979. This finding is consistent with the view that the Fed's inflation preferences during the Volcker-Greenspan regime differ considerably from the ones during the Burns-Miller regime.All Related Versions
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