Inflation Targeting under Asymmetric Preferences
By Francisco J. Ruge-Murcia. Social Science Research Network, 2001
192 citations recorded by the source corpus.
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 UK are statistically different from the one implied by the commonly used quadratic loss function.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/66ce0c608a8243cb727e17e20192fbbb7adb68eb
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In Economics and Econometrics
- Tim Bollerslev
- Torben G. Andersen
- Andrew J. Patton
- Peter F. Christoffersen
- Francis X. Diebold
- Kevin Sheppard
- N. Shephard
- George Tauchen
Citations in the corpus
- VOLATILITY AND CORRELATION FORECASTING (2006, background): “Volatility forecasting at horizons beyond a few weeks is found to be difficult by West and Cho (1995) and Christoffersen and Diebold (2000).”
- The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences (2007, unknown): “While a time-varying measure of the bias requires modeling (and possibly endogenizing) also the volatility of the output gap, Ruge-Murcia (2003) and Surico (2003) find empirical support for asymmetric preferences on”
- Why Does Private Consumption Rise After a Government Spending Shock (2007, unknown): “…allow consumer preferences to depend on government spending include Barro (1981), Aschauer (1985), Christiano and Eichenbaum (1992), Baxter and King (1993), Karras (1994), Ahmed and Yoo (1995), Ambler and Cardia (1997), Amano and Wirjanto (1997, 1998), and Cardia, Kozhaya, and Ruge-Murcia (2003).”